By The UK rental market has been provided with a glimmer of hope for tenants at last! The monthly UK rental costs have dropped falling again this month – down another -0.9%.
In all regions of the UK, with the exception of the East Midlands which saw a +0.3% increase, monthly rental costs have fallen. Many of which for the second consecutive month. In the capital, we’ve seen a -2.2% decline, one of the biggest drops seen in 2023 by HomeLet.
A bit of breathing space?
However, although the current downward trend in rental prices will go some way towards mitigating defaults. For the many landlords locked into the highest buy-to-let mortgage rates, this will only provide the slightest breathing space in what continues to be a tough market.
The green shoots of positivity also need to be viewed in the wider context of rental prices that soared by nearly +10% (+8.01%) in the last year alone. They have increased as much as +19.6% since 2021 – the equivalent of more than £200 extra per month. In regions such as Scotland and Greater London, these figures surpass +20%, at +23.4% and +21.4% respectively. A huge increase in just two years.
As of January 2024, HomeLet (tenant referencing and lettings insurance company) predicts tenants in the UK are now forking out just under 35% (33.4%) of their monthly wages on rental costs. This shows a +2% increase since last year. In Northern Ireland, concern is growing as this figure has increased by +10.7% in a year, rising to 38.1%.
Andy Halstead, HomeLet & Let Alliance Chief Executive Officer.
Halstead noted: ”January is a good time for us to reflect on the previous year with our HomeLet Rental Index and make predictions as to what is to come in 2024. The New Year starts with restrained optimism. Our records show a minor decrease in monthly costs for the second month in a row.
“In fact, rental prices have fallen in all regions across the UK with the exception of the East Midlands. In the capital tenants pay an average of £2127pcm, rents have dropped by nearly £50 per month since our November data was released.
“Whilst these figures can be viewed as a short term win for tenants at least – let’s not kid ourselves. This doesn’t represents anything resembling a breakthrough. We can safely say that 2023 was a year that most landlords and tenants will want to forget. Monthly rents increased by 8% in the matter of a year and have soared nearly 20% since 2021.
“We are cautiously optimistic that things can improve for the UK rental sector. It’s too early to talk about an upturn in fortunes just yet. Of course, marginally lower rents put slightly more money in tenants’ pockets. It partially reduces the likelihood of defaults, but the broader landscape is still incredibly challenging for all parties – with little sign of easing.
“Unless we see some dramatic changes, 2024 looks set to bring more of the same. Landlords will have to do battle with a familiar array of struggles, including a lack of stock, rising costs and prohibitively expensive buy-to-let mortgage rates.
“For those reasons, combined with lingering high inflation and the country’s financial crises, it’s unlikely we’ll ever see rental prices drop when we were exiting the Covid-19 pandemic. The impact of that, alongside questionable budget decisions and overall weak management of British finances, means that we estimate by this time in 2025, rent increases of between 5% – 10% won’t be surprising.
“Nevertheless, to see a small decrease in rental prices across the country this month has been a pleasant surprise. For the sake of the UK’s renters, we hope that this trend continues into 2024. Similarly, we hope that mortgage rates will continue to fall. We hope landlords who are entering the market or looking to renew their agreements can benefit from affordable rates. We shall wait and see.”
You can find a full breakdown of rent increases, variances and rent-to-income ratios on the HomeLet website. The trends reported within the HomeLet Rental Index are from data on actual achieved rental values. Providing an in-depth insight into the lettings market and what’s happening right now across the UK.
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