Rents fell in August as inflation grew

The cost of rent for new lets saw a 0.4% year-on-year decline in August as the rate of inflation grew for the ninth consecutive month, research reveals.

Data from Hamptons shows that the rent on a new tenancy is £1,387.

The firm says that the fall in rents is the joint second-largest annual decline since the agency’s Lettings Index began in 2011.

It’s also the biggest post-Covid fall recorded.

‘The market is recalibrating’

Aneisha Beveridge, the head of research at Hamptons, said: “For most of the last five years, rapidly rising rents were a key contributor to the UK’s high inflation story.

“But after several years of rapid rental growth, the tide is finally turning.

“For the ninth month in a row, rents have risen more slowly than inflation — offering tenants a rare moment of financial respite.”

She added: “While the monthly savings may seem modest, they mark a significant shift in the rental market’s role in driving inflation.

“Over the longer term, rents have consistently outpaced inflation, which means tenants today are paying more than they would have if rents had simply tracked CPI.

“For the most part, this has mirrored the rising cost pressures facing landlord, but this recent slowdown suggests the market is recalibrating.”

Rent rises higher than CPI

The latest figures show inflation reached 3.8% in July, a stark contrast to the stagnant 0.0% yearly rental growth in the same month.

Despite the recent slowdown, a longer-term view reveals that the cost of renting has substantially outstripped general price rises.

Over the past decade, rents have climbed by 41%, compared to a 33.7% increase in the Consumer Price Index.

Also, over a five-year period, they rose by 31.0%, while inflation totalled 24.9%.

Hamptons says that this disparity means that if tenancy costs had tracked inflation since 2015, the average renter would be £1,611 better off annually.

Over five years, the yearly saving would be £952, with the typical monthly payment at £1,308 instead of its current level.

London’s rents fall the most

The trend of falling rents varies across the country, with four of eleven regions now seeing negative growth.

London leads the way with a 3.3% annual drop though the decline is even more pronounced in Inner London, where rents have fallen 5.8% over the last 12 months, the largest drop since May 2021.

In Yorkshire and Humber, and the North East, small annual falls were noted for the first time since late 2019 and early 2020.

While the price of moving to a new property has eased, people choosing to renew their tenancy saw their rents rise by an average of 4.3%.

Even with this rise, staying put is around £90 per month cheaper than securing a new rented home, Hamptons says.

PRS responding to economic pressures

Ms Beveridge said: “With affordability stretched and demand softening, landlords are having to adjust to attract tenants.

“Like wages, rents don’t often fall.

“In fact, there have only been six months over the last 14 years when rents have fallen nationally on an annual basis.

“And when they do, it’s usually in real terms, rather than absolute terms.”

She adds: “What we’re seeing now is a real terms fall in rents – when inflation and wages outpace rental growth – which leaves tenants feeling better off.

“It’s a sign that the rental market is responding to wider economic pressures, and it could help ease the inflation headache for policymakers in the months ahead.”