Why is rental price growth slowing?
The average advertised rent for new properties outside London has dropped for the first time since 2019, signalling a potential turning point after years of record rent increases.
According to data from property platform Rightmove, the average monthly rent for a home outside London now stands at £1,341, a modest 0.2% decrease or equivalent to £3 compared with the previous quarter.
Although small, Rightmove said the dip marks a significant moment in the market as the pace of rent growth slows. At its height in 2022, annual rent growth reached 12%, but it has now cooled to 4.7% — the slowest rate recorded since 2021.
In London, rents have reached a new high of £2,695 per month. However, the quarterly increase was just 0.1% (£1), and annual rent growth in the capital has slowed to 2.4% — the lowest level in nearly three years.
One key factor behind the slowing rental growth is a gradual improvement in the supply of rental properties. The number of available rentals across Great Britain has risen by 13% year-on-year, providing some relief to a market that has been constrained by low inventory in recent years.
Demand has also softened, with 16% fewer prospective tenants enquiring about rental properties compared with this time last year. Several factors are influencing this shift. Some renters, particularly first-time buyers, are moving into the sales market as mortgage rates stabilise and wages increase. Some tenants are opting to stay put due to the high costs of moving.
While some landlords have exited the market due to legislative and financial pressures, others—particularly larger landlords—appear to be investing, helping to stabilise supply levels.
Despite these changes, competition for rentals remains strong, with an average of 10 applications per property. This is lower than the peak but still double the pre-pandemic average. Regional differences are evident, with the North East seeing a 30% increase in available rentals, compared with just 3% in Wales.
The upcoming Renters’ Rights Bill, expected to take effect later this year, is set to introduce significant changes for landlords and tenants. Despite this, the rental market has yet to see a major impact from the proposed legislation. New rental listings remain steady, and average rents have shown a slight decline, suggesting no immediate surge in landlord exits.
However, challenges remain for landlords. High mortgage rates and recent legislative changes have driven some to sell their properties. Rightmove reports that 15% of homes listed for sale in 2024 were previously rental properties, up from 13% in 2023. In London, nearly one in four homes for sale were formerly rentals, highlighting the region’s particular strain.
“A first quarterly drop in rents is the culmination of several months of improvement in the balance between supply and demand,” said Colleen Babcock, property expert at Rightmove. “While new tenants are still paying more than they were at this time last year, the pace of growth continues to slow.”
“However, though this is the big picture of market activity, agents on the ground still tell us that the market is very hot, and some areas have improved more than others when it comes to the supply and demand balance. Our own data shows that the average rental property is still receiving 10 applications per property, which is lower than the peak, but still double the pre-pandemic norm.”
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