"[There] are signs that tenants are hitting an affordability ceiling and would not be able to meet significant rent rises"
The winter is typically one of the quieter periods for the market. For context, earlier this year in the summer, agents were receiving 19 enquiries per property.
The number of available properties has improved by 7% compared with this time last year, while the number of prospective tenants looking to move has dropped by 19% compared to last year.
This improvement in the balance of supply and demand has contributed to a slowing in the pace of rent growth compared with last year -the latest figures show that average rents outside of London are now £1,339 per calendar month, 4.5% above this time last year, the slowest rate of annual rent growth since 2021, while rents are 2% above last year in London.
Rightmove predicts that average newly advertised rents will rise by 3% outside of London, and 3% in London by the end of 2025. Whilst the ongoing lack of available rental homes compared with the number of people looking to rent indicates further rent growth next year, there are signs that tenants are hitting an affordability ceiling and would not be able to meet significant rent rises.
Letting agents are having to reduce the price of more rental properties, with 26% of rental properties currently seeing a reduction in the advertised rental price before finding a tenant, compared with 23% last year.
In addition, wages have already failed to keep up with rent rises, stretching affordability. Average UK rents have risen by 40% over the last five years, whilst earnings have risen by 28%.
Tim Bannister, Rightmove’s property expert, said:
“There are two competing factors influencing rental price changes right now. The ongoing imbalance between supply and demand is putting upwards pressure on prices. On the other hand, rent rises outpacing wage growth over the past 5 years has stretched affordability to extreme levels, and is showing in the increasing number of price reductions. Whilst at a top-level, we’ve seen overall improvements in the balance between supply and demand, agents tell us they are still extremely busy and having to manage high volumes of tenant enquiries. We’re therefore likely to see a more normal figure of around 3% growth in newly advertised rents next year.”
Angharad Trueman, ARLA Propertymark President and practicing letting agent, comments:
“The issue of demand far outstripping the number of homes available to rent is continuous.
“Landlords are also battling increasing costs including rising tax and mortgage costs, and many are finding it difficult to break even. The rental landscape continues to put pressure on investors and, ultimately, many are faced with the decision of exiting or considering exiting the market altogether.
“Without incentives for landlords to enter or remain in the market, rent prices and stock levels are likely to continue to worsen.”
