Rental costs fall for third month in a row

After three years of double digit hire rises, the rental market lastly seems to be cooling.

Rental costs within the UK have dropped for a 3rd consecutive month, in response to the HouseLet Rental Index. This index makes use of tenant referencing information from a couple of million renters yearly.

It exhibits that in January common rents fell by 0.6 per cent, following a 0.9 per cent fall in December. Since October, the common hire has fallen from a excessive of £1,283 a month to £1,260 a month as of January.

This follows three years of dramatic month-on-month rises which drove the common rentup by 32 per cent, from £974 to £1,283 a month between October 2020 and 2023.

HouseLet says each UK area noticed common rents fall in January aside from the East Midlands, West Midlands and the South West.

The figures from HouseLet chime with information launched at this time by Hamptons.

The property agency revealed common rents on newly-let properties rose at their slowest tempo for 13 months, up by 8.3 per cent year-on-year throughout the UK.

This marks a change in tempo from 2023 when rental progress peaked at 12 per cent in August and slowed barely to 10.2 per cent in December.

Hamptons says that final month 59 per cent of landlords achieved the next hire when a brand new tenant moved in, down from a peak of 81 per cent in January 2022 and 79 per cent in January 2023.

Aneisha Beveridge, head of analysis at Hamptons, mentioned: ‘Last summer season seems to be like it could have been the excessive watermark for rental progress.

‘Since then, fewer landlords have been placing up the hire. Where they’ve, in money phrases, month-to-month will increase have tended to be in double quite than triple figures.’

We determined to contact plenty of letting brokers across the UK to determine if they’re additionally seeing the rental market cooling.

Lorraine Ashelby, letting and property administration director at Countrywide in Scotland, mentioned: ‘We have observed a slight shift in rents in central Glasgow and surrounding markets.

‘This market is consistently altering and we’re at present seeing the necessity to decrease rents, albeit gently.

‘Where we now have beforehand seen rents attain as much as 30 per cent above market worth because of distinctive demand, we at the moment are seeing demand equalling provide and lots of tenants will not be ready to pay over the market worth.

‘Furthermore, tenants anticipate a really properly introduced property if paying the highest finish costs commanded within the City.

‘In our outlying branches protecting the West Coast to Dundee, hire change could be very refined and in lots of areas stays flat.’

Angela Davey, head of lettings at Peter Alan in Wales, says that whereas rents preserve rising in cities, rents in smaller cities and rural areas are beginning to flatline.

She says: ‘Average rents are nonetheless at document ranges right here in Wales however the newest progress charges have been the bottom since pre-pandemic, and early indicators point out that the annual tempo of hire progress will sluggish additional in 2024.

‘Despite the present development of modest rental progress in Wales, particular areas throughout the nation exhibit extra pronounced fluctuations.

‘Notably, city centres and areas with excessive demand for rental properties, like Cardiff, are witnessing comparatively larger rental progress charges.

‘On the opposite hand, rural areas and smaller cities might even see slower rental progress and even stagnation, with progress charges beneath the nationwide common.’

Meanwhile, Matthew Hardwick, lettings department director at William H Brown in Lincoln, says that rental demand very a lot is determined by the kind of property.

Hardwick says: ‘In the Lincoln space, we’re nonetheless seeing general rents growing, nevertheless we’re discovering that sure property varieties might even see slight reductions merely because of decrease demand.

‘For instance, a bigger home with 4 or 5 bedrooms is at present much less in demand and subsequently extra prone to see a worth discount than a two or three bed room property – these are our bread and butter properties for which rents proceed to extend as there may be way more competitors amongst tenants.’

Why are rents falling?

Over the previous three years, a lot has been manufactured from the very fact there will not be sufficient accessible houses to let to fulfill the rising demand from renters.

However, it seems that this imbalance is lastly beginning to tip again in favour of renters.

Hamptons says there are 34 per cent extra rental houses available on the market at this time than on the identical time final 12 months.

This is primarily a mirrored image of the elevated time it takes to let a property, quite than a giant enhance within the variety of new rental houses coming onto the market.

However, there stays a scarcity. For instance there are nonetheless 43 per cent fewer rental houses in comparison with the identical time in 2019 – earlier than rents started capturing up.

‘The scale of mortgage charge rises kickstarted two years of record-breaking rental progress. As landlords have rolled off mounted phrases, they have been partly feeding these larger prices by to tenants within the type of larger rents.

‘While the upward stress on rents appears set to weaken in 2024, notably since mortgage charges have come down, wider pressures on landlords imply rental progress will stay stubbornly sticky.

‘Reduced returns coupled with the extra time and monetary prices stemming from rental reform have squeezed the numbers of recent landlords. This seems to be set to maintain rental progress working forward of inflation this 12 months.’

London hire falls paved the way

The rental market within the capital seems to be cooling the quickest at current.

Annual rental progress within the capital greater than halved between August and January, falling from 17.1 per cent to eight.1 per cent, in response to Hamptons, which means it recorded the slowest rental progress in two years.

The common month-to-month hire for a property in Greater London has fallen by greater than £100 a month from a excessive of £2,192 a month in October to £2,081 a month as of January – equating to a 5 per cent fall.

Again, it’s probably that an growing variety of accessible rental houses helps to convey costs down within the capital.

According to London letting agent Chestertons, there are 41 per cent extra rental properties at present accessible in London than there have been in January 2023.

With extra properties available on the market, it says that tenants are having fun with extra selection and are beneath much less stress to decide shortly. 

Data from Rightmove helps this, exhibiting that the common size of time a property is listed on the platform earlier than being let or positioned beneath supply elevated from 33 to 39 days. 

This has led to a larger variety of landlords slashing asking costs with a view to appeal to tenants.

Adam Jennings, head of lettings at Chestertons, says: ‘We have seen a major enhance in landlords bringing their property to market as they’ve been attracted by the substantial hire will increase over the past 18 months or so.

‘This inflow of properties has led to extra selection for tenants and because of this many landlords have determined to decrease their hire expectations.

‘We foresee the variety of accessible rental properties to proceed to develop in 2024, which is able to trigger hire ranges to regulate additional. 

‘This does create extra helpful market circumstances for tenants, nevertheless, London nonetheless has one of the crucial aggressive lettings markets on the market and we advise tenants to start out their search as early as doable.’

What subsequent for rental costs?

Despite optimistic information on the floor for renters, HouseLet’s specialists consider this isn’t the start of a downward development.

In truth, HouseLet’s specialists are nonetheless predicting that rental prices may rise by an extra 5 – 10 per cent by January 2025.

Andy Halstead, chief govt officer at HouseLet and Let Alliance, says: ‘Though we will completely be optimistic about these short-term positive aspects, it’s not time to have a good time simply but.

‘On the one hand, it’s nice to see hire costs proceed to fall month on month, and by the most important quantity in years. 

‘But alternatively, we additionally know the market and are properly conscious of the exterior components which will affect it within the coming months.’

Halstead provides: ‘Of course, marginally decrease rents put barely more cash in tenants’ pockets and partially scale back the probability of defaults, however the broader panorama remains to be extremely difficult for all events – with little signal of easing. 

‘In truth, following final 12 months’s trajectory, it’s totally doable that rents might be 5 or 10 per cent larger by this time subsequent 12 months.

‘Unless we see some dramatic modifications to the financial system, 2024 seems to be set to convey extra of the identical. 

‘Landlords must do battle with a well-recognized array of struggles, together with rising prices and prohibitively costly buy-to-let mortgage charges.

‘I’ll be protecting a eager eye on the Spring Budget subsequent month, to see what sort of assist will likely be provided to renters and landlords.’