Average UK rents on newly let properties across rose 8.3% to £1,324 in January from a year ago, the slowest pace for 13 months and the first time in six months that growth has slipped into single digits.
This marks a slowdown from 2023 when rental growth peaked at 12% last August and eased to 10.2% in December, data from Hamptons latest Monthly Lettings Index shows.
It adds that last month 59% of landlords achieved a higher rent when a new tenant moved in, down from a peak of 81% in January 2022 and 79% in January 2023.
There are 34% more rental homes on the market today than at the same time last year, but 43% fewer compared to the same time in 2019, the report points out.
But it says that while rental growth is slowing from record levels, it is set to “remain stubbornly sticky”, running ahead of inflation, currently at 4%, for the rest of this year.
In London, annual rental growth more than halved between August and January, falling to 8.1%, at £2,315 per month, from 17.1%, meaning the capital has recorded the slowest rental growth in two years.
Hamptons head of research Aneisha Beveridge says: “Last summer looks like it may have been the high watermark for rental growth.
“Since then, fewer landlords have been putting up the rent. Where they have, in cash terms, monthly increases have tended to be in double rather than triple figures.
“The scale of mortgage rate rises kickstarted two years of record-breaking rental growth. As landlords have rolled off fixed terms, they’ve been partly feeding these higher costs through to tenants in the form of higher rents.
“But just over two years on from the first Bank of England rate hike, higher rents coupled with higher prices more generally have placed an increasingly tight straitjacket around tenant’s finances, curtailing their ability to pay more.
“While the upward pressure on rents seems set to weaken in 2024, particularly since mortgage rates have come down, wider pressures on landlords mean rental growth will remain stubbornly sticky.
“Reduced returns coupled with the additional time and financial costs stemming from rental reform have squeezed the numbers of new landlords. This looks set to keep rental growth running ahead of inflation this year.”
