Increasing Rents and Rental Market Dynamics

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Since April 2018, there has been a significant shift in rental trends in the UK. Initially, new tenants paid just 1.1% more than those renewing their leases. However, over time, open market rents have surged by 38%, while rents for existing tenancies have risen by 21%. This has led to a noticeable gap between what new and renewing tenants pay for their homes.

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As of the beginning of 2024, rents for renewing tenants have also started to climb. This year, 61% of landlords successfully negotiated higher rents with new tenants, while an impressive 88% secured rent increases when renewing contracts with existing tenants. On average, renewing tenants face rent hikes of 8.3%, compared to a more modest increase of 6.4% for new tenants.

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This trend reflects a catch-up phenomenon, where rents for renewing tenants gradually align with current market rates. Despite this adjustment, renewing tenants still pay 13.4% less than those entering into new rental contracts.

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UK Private Rents and House Prices Update

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In the 12 months leading up to May 2024, average private rents in the UK rose by 8,7%, slightly lower than the revised estimate of 8.9% in April 2024 and below the record-high increase of 9.2% in March 2024.

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House prices across the UK also changed, with the average price increasing by 1.1% to £281,000 from 12 months to April 2024. This marks an improvement from the 0.9% rise in March 2024 and follows eight consecutive months of annual price declines.

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Here's a breakdown of average house price increases across regions:

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• England: £298,000 (+0.6%)
• Wales: £208,000 (+0.4%)
• Scotland: £190,000 (+4.5%)
• Northern Ireland (Q1 2024): £178,000 (+4.0%)

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Private Rents Across Great Britain

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As of May 2024, the average monthly private rent in Great Britain stood at £1,262. This represents an increase of £101, or 8.7%, compared to the same month twelve months ago.

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England 

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In May 2024, the average rent in England was £1,301 per month, marking an 8.6% (£103) increase from the previous year. This annual rise reflects a slight decrease compared to the 8.9% increase recorded in the 12 months leading up to April 2024 and signifies the second consecutive month of moderated annual inflation following the peak of 9.1% in March 2024.

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Scotland

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As of May 2024, the average rent in Scotland stood at £957 per month, showing a 9.3% (£81) increase compared to the previous year. Scotland's annual inflation rate has gradually decreased since reaching a peak of 11.8% in August 2023, which was the highest recorded since data collection began in 2012.

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The recent trend of rising inflation from late 2021 to mid-2023, followed by a slight moderation in annual increases, likely reflects adjustments in rental rates for new lets that were not subject to Scotland's previous in-tenancy price cap.

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Wales

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The average rent in Wales was £736 per month, reflecting an 8.5% (£58) increase from the previous year. This annual rise is slightly higher than the 8.2% increase recorded in the 12 months leading up to April 2024. Wales has seen a gradual slowdown in annual inflation since reaching a peak of 9.8% in November 2023, which marked the highest recorded increase since data collection began in 2010.

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Northern Ireland

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Up to March 2024, the average rent in Northern Ireland increased by 10.3% over the preceding 12 months. This represents a slight decrease from the 10.4% increase observed in the 12 months leading up to February 2024, which marked the highest annual rise recorded since data collection began in 2016.

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Private Rents Across Local Areas

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Average monthly private rents vary significantly across local authorities in England and Wales and Broad Rental Market Areas in Scotland.

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In London, Kensington and Chelsea recorded the highest average rent at £3,397 per month, while in Scotland, Dumfries and Galloway had the lowest at £480 per month.

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Excluding London, the local area with the highest average rent in May 2024 was Elmbridge in the South East, where rents averaged £1,780 per month.

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Private Rents by Property Size in Great Britain

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In May 2024, private rents in Great Britain varied significantly by property size:

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• Detached properties: The average rent was highest for detached properties, averaging £1,461 per month.

• Flats and maisonettes: These types of properties had the lowest average rent at £1,228 per month.

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Property size breakdown

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• Properties with four or more bedrooms: Average rent was highest at £1,932 per month.
• Properties with one bedroom: Average rent was lowest at £1,009 per month.

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Increased Rental Home Options

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The average number of homes available for rent per estate agent has risen by nearly a fifth (18%) compared to last year, providing renters with more options. However, the supply of rental homes remains one-third lower than before the pandemic, largely due to limited investment in rented properties, which keeps overall stock levels stable.

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This trend of decreased rental demand and a moderate rise in supply is consistent across all regions and countries of the UK. Demand has notably decreased by up to 30% in the East of England, with London (-28%), the South East (-27%), and Scotland (-27%) following closely behind.

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Typically, more rental properties become available during the spring season before demand rises from May to September each year. Currently, London (23%) and Scotland (24%) have seen the largest increases in rental supply.

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Conclusion 

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The rental market is expected to slow down, with inflation likely to reach around 5% in 2024. Recent rapid rental growth has been unsustainable, making a slowdown inevitable. This slowdown is mainly due to changes in demand rather than an increase in available rental properties.

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Although the Rental Reform Bill did not become law, rental reform is expected to resurface as a key issue in the next parliament, regardless of the governing party. While protecting existing renters is important, the priority should be on increasing the supply of rental homes, both private and affordable, through greater housing development efforts.

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