UK Rental Market Sees Decrease in Prices After Three Years of Increases

After three years of consistent rent hikes, the UK rental market is finally cooling down. HomeLet Rental Index shows prices dropping for the third month in a row.

After three years of consistent rent increases, the UK rental market is finally showing signs of cooling down. According to the HomeLet Rental Index, rental prices have dropped for the third consecutive month. In January, average rents decreased by 0.6 per cent, following a 0.9 per cent decline in December. Since October, the average rent has fallen from £1,283 to £1,260 per month. This comes after a period of significant month-on-month increases that saw the average rent surge by 32 per cent between October 2020 and 2023.

HomeLet's data reveals that all UK regions, except for the East Midlands, West Midlands, and the South West, experienced a decrease in average rents in January. This aligns with the findings from Hamptons, which reported that average rents for newly-let properties rose at the slowest pace in 13 months, increasing by 8.3 per cent year-on-year across the UK. This marks a shift from the peak rental growth of 12 per cent in August 2023.

The increase in available rental properties seems to be a key factor driving the decline in rental prices. Hamptons notes that there are 34 per cent more rental homes on the market compared to the previous year. While this has contributed to a slower rental growth rate, there is still a shortage of rental properties compared to pre-2020 levels.

London's rental market is experiencing the most significant cooling effect, with annual rental growth more than halving between August and January. The average monthly rent in Greater London has dropped by over £100 from its peak in October. The increased availability of rental properties in London has given tenants more options and reduced the pressure to make quick decisions.

Despite the recent decline in rental prices, experts at HomeLet do not believe this marks the beginning of a downward trend. They predict that rental costs could rise by 5-10 per cent by January 2025.

The UK rental market is showing signs of stabilization after years of rapid growth. While renters may benefit from lower prices in the short term, the overall trend suggests that rental costs could continue to rise in the coming years.