London rents hit record high of £2,633 a month

The costs of average advertised rental properties coming onto the market continue to balloon, especially in London, according to new data by property platform Rightmove (RMV.L), with average rental prices in the capital reaching a new record of £2,633 per calendar month.

The latest data shows that rental prices have reached new records for a seventeenth consecutive month across the country too, with the average price outside of London now £1,291 per month.

Despite the fact that average prices are now 8.5% higher than a year ago, there is potential relief on the horizon. The pace of rent growth has dropped for the second quarter in a row, with London experiencing a more significant pace of slowing rental growth than the rest of the country.

Average rents in the capital are now 5.3% higher than last year, with rent growth steadily slowing since the peak of 16.1% in the third quarter of 2022.

"The rental market is no longer at peak boiling point but it remains at a very hot simmer," said Tim Bannister, Rightmove's director of property science.

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"Looking at data across the whole market, we can see some slow improvements for tenants with more choice, and competition with other tenants slowly starting to ease."

Supply constraints for renters

Although the balance of supply and demand is slowly improving from its peak, there are still nearly 50,000 more rental properties needed to reach the pre-pandemic level of rental supply in the UK, according to Rightmove.

The latest market statistics show that the number of rental properties available to tenants is 11% higher than at this time last year, though still 26% below 2019.

Similarly, the number of would-be tenants looking for a home to rent has eased by 17% compared to last year but is still 54% higher than pre-pandemic 2019.

"The pace of new supply coming onto the market is probably due to a combination of the relatively low numbers of new landlords coming into the market, and a few landlords looking to sell," said Simon Thompson, group lettings director at Miles & Barr in Kent.

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As such, letting agents are still unable to meet the level of demand from tenants and are now fielding an average of 13 enquiries per rental property. Whilst this is down from 19 this time last year, it is still nearly triple the average of five back in March 2019.

Whilst average rents are continuing to grow, there is evidence that tenant affordability is being severely tested, as reductions in rental prices are now at a five-year high for this time of year.

The proportion of rental properties that see a reduction in price now stands at 22%, up from 16% at this time last year, and the highest at this time of year since 2019 when it was 23%.

This suggests more landlords are having to reduce the advertised rent to meet the affordability of their local market.

The largest homes, top-of-the-ladder market sector, which includes four-bedroom detached houses and all five-bedroom properties and above, are the most likely to be reduced.

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A third (30%) of top-of-the-ladder properties currently see a reduction in price, a new record for this time of year dating back to 2012.

The news comes following data that shows the average asking prices for UK homes rose by 1.1% in April, hitting £372,324 despite a period of prolonged pressure on potential buyers from hiked interest rates.

The average monthly increase of £4,207 is in line with the 10-year average for this time of year, according to Rightmove's monthly house price index. The average price for a property coming to market for sale is now just £570 short of May 2023’s record of £372,894, while the annual rate of price growth increases to 1.7%, the highest level for 12 months.

The bump can be attributed to strength among prospective sales of the country's most expensive homes, Rightmove said. The so-called "top-of-the-ladder" sector saw its strongest price growth since 2014.

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