London rents ‘have reached the maximum’ as rental inflation falls to lowest level in almost three years

Rents in the capital have “outperformed expectations and are adjusting”, falling 0.4 per cent in the first half of 2024, reports Zoopla. Over a third of London boroughs (12 out of 33) have seen falling rents so far this year, led by inner London areas such as Tower Hamlets, Newham and Greenwich.

While rents rose by 5.7 per cent across the UK, Zoopla said the UK was “well past the peak of rental growth” as rents eased in major cities. Rents continue to rise in areas where people who can no longer afford more expensive areas are moving to find affordable housing.

Rent inflation (the year-on-year change in prices) for new lettings has slowed from 6.9 percent in 2021 to 1.6 percent – ​​the lowest rate in three years.

“Tenants will welcome the fact that rents for new builds are rising at their slowest pace in three years,” says Richard Donnell, managing director of Zoopla.

“Rents have risen so quickly that they have exceeded peak prices in some cities, and in some cities we are seeing slight declines in rents as rents adjust to weaker demand and slightly increased availability of rental housing.”

There are several reasons for this relaxation between supply and demand, according to the real estate portal.

Lower mortgage rates – provided by the major lenders ahead of the Bank of England's small base rate cut – have made it easier for first-time buyers to escape the rental trap, freeing up more rental properties. Demand for rental properties has fallen by 39 per cent in the past year, Zoopla reported.

Although some private landlords are selling their homes due to historically high mortgage rates, corporate landlords are buying more new homes to rent out. As a result, estate agents are reporting a 17 percent increase in the number of rental properties on their books compared to the same period last year.

The average rent in the UK is currently £1,232 per month, £66 more than the same period last year.

While Zoopla does not predict an overall decline in rents for 2024, rent increases may be less dramatic than in recent years.

“Rents are expected to be three to four percent higher in 2024,” Donnell said.[That’s] more than half of last year’s levels and below earnings growth, providing some relief to UK private renters.”