Rents on private properties in London showed signs of cooling last month, according to a new report, offering a glimmer of hope for the sector after a torrid year.
In Greater London, annual rent rises grew 5.8 per cent to the end of March to an average of £2,304, compared with a 17.1 per cent increase recorded in the 12 months to August, according to new figures published by estate agent Hamptons.
In Inner London, the rise was 0.4 per cent to an average of £3,060, down from 11.8 per cent in August. The region has also only seen rents rise 17 per cent compared to pre-pandemic levels, the smallest increase anywhere in Britain.
Aneisha Beveridge, head of research at Hamptons, said: “During the last two years, tenants have found themselves squeezed financially from all sides.
“While their ability to afford the rent is typically tested when they move into a new home, increases in rents have come alongside big hikes in energy and food bills.”
She added: “Even though increases in these costs are slowing and, in some cases, reversing as inflation nears its two per cent target, living costs remain much higher than two years ago.”
London estate agent Chestertons also confirmed a strong start to spring’s lettings market with 10 per cent more tenants signing a tenancy agreement in March compared to February.
The agency also saw 11 per cent fewer tenants withdrawing their offer, suggesting that the “majority of renters are motivated to finalise their search as soon as possible”.
Adam Jennings, who heads up lettings at the firm, said: “As we head further into spring, demand for rental properties will only grow which will see rents going up again if supply doesn’t follow suit.
“In March, we already saw a 1.5 per cent decrease in the number of available rental properties compared to the previous month.”
He added: “Due to this and the uplift in tenants wanting to move, we are beginning to see fewer landlords who are willing to accept a rent reduction compared to February. Having said that, any rent increases are likely to be subtle.”
It follows a torrid year for London’s rental market as hiked mortgage and energy rates led landlords to raise rents or put their house on the market.
Lodgers also began offering above the asking price to secure a room or flat leading to bidding wars.
Tim Bannister, director of property science at Rightmove, said early this year it is likely the market has hit an “affordability ceiling”.
He said: “The trend of rent growth gradually slowing continues, with an improvement in the supply and demand of rental properties having a big contribution to that.
“We can’t keep seeing double digit rent rises every year as tenant affordability simply cannot keep up, and 2024 is the year we think there will be a much smaller increase in advertised rents of five per cent outside of London, and three per cent in the capital.”