Rents hit new highs but growth slows down

Rents in the UK reached new records in 2023, but the pace of growth slowed down significantly compared to previous years, according to Rightmove.

There are also signs that some areas are seeing the tenant affordability ceiling being reached.

The property website reports that the average advertised rent for properties coming onto the market outside of London last year was £1,280 – that’s up 9.2% from 2022.

This was the 16th consecutive record in newly advertised rent prices, but the quarterly rise of just £2 (+0.2%) was the smallest since 2019 before the pandemic.

‘Trend of rent growth gradually slowing continues’

Rightmove’s director of property science, Tim Bannister, said: “The trend of rent growth gradually slowing continues, with an improvement in the supply and demand of rental properties having a big contribution to that.

“We can’t keep seeing double digit rent rises every year as tenant affordability simply cannot keep up, and 2024 is the year we think there will be a much smaller increase in advertised rents of 5% outside of London, and 3% in the capital.”

More tenants are hitting an affordability ceiling

There are also signs that more tenants are hitting an affordability ceiling – which is also leading to slowing rent rises.

Nearly a quarter (23%) of rental properties saw a reduction in advertised rent by the landlord, up from the 16% in 2022.

This suggests the initial advertised rent in some areas was increasingly out of reach for some tenants.

Average advertised rent for new properties

In London, the average advertised rent for new properties was £2,631 in 2023, up 6% from 2022 – a new record, but only £4 (0.2%) higher than the previous quarter.

The annual increase of rents in the capital halved from 12% in the second quarter of 2023 and was the first time London’s rent rises were in single digits versus a year ago since 2021.

Rightmove says that the early signs indicated that the annual pace of rent growth would slow further in 2024 and predicted rents to be 5% higher outside of London and 3% in London by the end of 2024.

Factors behind the slowing of rent rises

One of the main factors behind the slowing of rent rises, and the expectation of a further slowdown this year, was an improvement in the balance of supply and demand in the rental market.

The trend of supply increasing and tenant demand decreasing continued at the start of 2024 with the number of tenants sending enquiries to letting agents being 13% lower than the same period in 2022.

Also, the number of new rental properties coming onto the market was 7% higher than 2022.

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