North-South divide in rents continues to narrow
Rental growth across Great Britain has slowed over the past year, with newly let properties experiencing a sharp decline in growth rates, latest data from residential estate agent Hamptons has revealed.
In August 2022, rental growth peaked at 12%, significantly higher than the pre-COVID average of 2.5%. However, last month, the rate of rental growth fell to 5%, its lowest level since April 2021.
“Despite the pace of rental growth slowing, it’s remained resolutely in positive territory, triggered by landlord’s higher costs,” said Aneisha Beveridge (pictured), head of research at Hamptons. “Nearly half of the average monthly rent a landlord receives now goes towards costs. At the same time, investors are starting to think about the upcoming budget.
“While recent budgets have mostly left investors alone, landlords will be watching October’s announcement more closely than usual to get a steer on what they can expect from a Labour government.”
In the South of England, rental growth has decreased from 8.7% to 5% over the past year. In contrast, the North of England continues to see strong rental growth, with rents rising by 9.6% year-on-year, nearly matching last year’s rate of 9.7%.
The latest Hamptons Monthly Lettings Index showed the gap between rents in the North and South has narrowed to its smallest margin since records began in 2013. Last month, the average rent for a new tenancy in the South was £1,318 per month, 37% higher than in the North, where rents averaged £960. This gap has decreased from 43% in August 2023 and from a peak of 55% in November 2021.
In cash terms, the gap between Northern and Southern rents has also fallen. Last month, the average rental home in the South cost £357 more per month than in the North, down from £378 in August.
The North East has seen the steepest rent increases in Great Britain, with rents up 12.1% year-on-year. This marks the third consecutive month of double-digit growth in the region. Meanwhile, London saw the smallest rent increases, with rents rising by just 2.1% year-on-year, compared to the 17.1% recorded in August 2023.
The North-South divide in rents has been closing steadily over the past five years. Across Great Britain, average rents have risen by 34%, or £349 per month, over this period. In the North, rents have increased by 48%, outpacing the 34% growth seen in the South. This trend reflects a broader catch-up in house prices in the North relative to the South.
“Much like house prices, the rental North-South divide has been closing for the last five years,” Beveridge reiterated. “The narrowing reflects the cyclical nature of the housing market with house prices in the North of England rising 31%, nearly double the Southern rate. These figures have been mirrored in the rental market, with rents in the North of England quickly playing catch up.
“But it’s only been in the last year that the gap has really started to narrow beyond the point we’ve previously seen. This has been driven by the slowing of rental growth across Southern England caused by greater affordability pressures.”
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