"We're entering 2024 cautiously optimistic. On one hand, it's great to see rent prices continue to fall month on month, and by the biggest volume in years. However, we also know the market and are well aware of the external factors that may impact it in the coming months."
- Andy Halstead - HomeLet
The decrease, which proceeds a -0.9% reduction in rates in December 2023, sees us enter a period that boasts the biggest monthly drop recorded since October 2020, where prices fell by 1.3%. However, specialists caution not to get too optimistic, hinting that short-term gains may be wiped out by long-term struggles in the coming months.
The HomeLet Rental Index, which is released monthly and analyses archived rents to paint a general picture of the UK market, has revealed that rental prices fell in most UK regions in January; with London and Northern Ireland seeing the biggest drops of -2.2% and -2.3% respectively. Concerns now point to the Midlands; with both the East and West Midlands reporting rent hikes, unlike the rest of the country this month.
Successive price drops across the nation could mean that tenants are saving up to £50pcm on rent compared to just a few months ago. However, experts say this isn't set to last.
Although the current downward trend in rental prices will go some way towards mitigating defaults and taking pressure off the average tenant, the wider context is that rental prices are still +7.51% up since February 2023, and a shocking +18.4% since February 2022; the equivalent of £200pcm more in two years.
Despite positive news on the surface, Andy Halstead, HomeLet & Let Alliance CEO, cautions that landlords and tenants are still under immense pressure amid tough economic conditions, and short-term gains do not reflect the long-term struggles faced by the housing industry.
Andy explains: “We're entering 2024 cautiously optimistic. On one hand, it's great to see rent prices continue to fall month on month, and by the biggest volume in years. However, we also know the market and are well aware of the external factors that may impact it in the coming months.
“Though we can absolutely be positive about these short-term gains, it's not time to celebrate just yet. In Northern Ireland, for example, a -2.3% drop in rental prices means the average tenant is saving almost £20pcm compared to December 2023.
"However, prices in that region have soared by almost +10% (+8.9%) since last year alone; and that equates to nearly £75pcm. So, by all means, view this month's figures with optimism, but we need to take it with a massive pinch of salt and hope that the declines remain steady.
He adds: “Of course, marginally lower rents put slightly more money in tenants' pockets and partially reduce the likelihood of defaults, but the broader landscape is still incredibly challenging for all parties - with little sign of easing. In fact, following last year's trajectory, it is entirely possible that rents could be 5% - 10% higher by this time next year.
“Unless we see some dramatic changes to the economy, 2024 looks set to bring more of the same. Landlords will have to do battle with a familiar array of struggles, including rising costs and prohibitively expensive buy-to-let mortgage rates.
Andy concludes: “I'll be keeping a keen eye on the Spring Budget next month, to see what kind of support will be offered to renters and landlords. There's speculation of a 99% mortgage offer being put on the table, which could encourage more buy-to-let purchases. But will that help the rental market, or hinder it? Only time will tell.”
