There are growing signs that tenants have hit an ‘affordability ceiling’ as they spend record sums in rent, new research suggests.
The average asking rent for new properties coming onto the market has hit £1,280 a month for those outside of the capital, according to Rightmove.
It is the 16th consecutive record in asking rent, with tenants appearing to show signs that the level of hikes is unaffordable, with Rightmove revealing that almost a quarter – 23% – of rental properties listed on its website had the advertised rent reduced in Q4 2023, up from 16% 12 months earlier.
Consequently, the increase in rental growth is slowing; Rightmove’s latest data shows growth of just £2 quarter-on-quarter, which is the smallest increase since at this time in 2019
Industry reactions:
Nathan Emerson, CEO at Propertymark, said: “It is encouraging to see a firm flow of new rental properties coming onto the market, and Propertymark would like to see that trend continue across the year. Propertymark hopes that the UK Government will use the new year as an opportunity to further stimulate growth in the rental market by encouraging a cut in interest rates, reducing mortgage costs and taxes, and provide further incentives to landlords to invest in the private rental market.”
Adam Feather, managing director of Robert Anthony, commented: “The supply-demand imbalance in the rental market is not going to disappear anytime soon, and that in part is why rents are likely to rise further in the near-term, but at a slower rate as affordability pressures restrict the pace at which rents can increase.
“It is welcome news for both tenants and letting agents that more supply is coming on to the rental market, and hopefully rising yields will start to encourage more landlords back into the market.”
Hayley Brinn, director at The Total Letting Service, said: “The market is still really busy, and the high number of applicants per property is being exacerbated by some landlords leaving the market. Prices appear to be levelling out now as more choice becomes available, with tenants becoming more price sensitive, or just reaching the maximum of what they can afford to pay. The prices of larger properties in particular are slowing down, unless the landlord accepts an offer. Some tenants are reluctant to move unless they have no choice, due to the risk of being charged higher rents elsewhere, while other tenants who may want to move are stuck due to their current rent being below market value, and the price gap to move to a larger house is out of their reach. Rent prices slowing this year would benefit these tenants wanting to move.”
Peter Lee, director at Redbrik in Sheffield, commented: “Several factors have contributed to the increased demand for rental properties, including rising mortgage rates, making purchasing less affordable. Additionally, the post-Covid landscape has allowed for greater flexibility in remote working, prompting a notable influx of young professionals relocating from London to more cost-effective cities in the North. Consequently, rental prices have grown substantially, and the smaller homes market has experienced the most significant and sustained increase. Whilst the larger homes market has also experienced an upward trend, the rate of increase has been more modest, resulting in a compression of overall price differences between smaller and larger properties. It’s important that landlords are up to date on the latest market trends and activity in their area so that they can price accurately, and secure the best tenant for the long term, and minimise void periods.”