New data from Hamptons indicates a significant slowdown in rental price growth, with increases now occurring at just a third of the wider inflation rate. This marks a notable shift in the rental market, suggesting that affordability pressures and economic conditions may be influencing tenant demand and pricing trends.
Over the 12 months leading up to February 2025, the average rent for a newly agreed tenancy across Britain rose by only 1.0%. This is the slowest rate of growth recorded since September 2020, when rents began to recover following an initial decline at the start of the Covid-19 pandemic. The rapid increases seen in recent years appear to be cooling, providing some relief to tenants who have faced rising rental costs.
A key factor contributing to this slowdown is London, where newly agreed rents have fallen by 2.8% compared to the same time last year. This decline has had a significant impact on the national average, as London’s rental market typically plays a major role in driving overall trends. The fall in rents suggests that supply and demand dynamics in the capital are shifting, potentially due to affordability constraints or an increase in available rental properties.
Despite this moderation in rental growth, the broader market remains under pressure, with affordability still a key concern for many renters. Landlords and letting agents will be watching closely to see if this trend continues or if demand picks up again in the coming months.
Recent declines in rental prices have brought the cost of securing a new tenancy in London back to levels last seen in May 2023. This shift indicates that the rental market in the capital is cooling, offering tenants more opportunities to find better deals on new properties. With rental demand fluctuating and landlords adjusting their pricing strategies, affordability pressures are beginning to ease for renters looking to move.
Over the past 12 months, newly agreed rents in Inner London have fallen by 5.1%, placing them 9.4% below their peak from the previous year. This significant drop suggests that landlords are responding to changing economic conditions, including an increase in supply and a potential decline in tenant demand. For renters who have been struggling with rising costs over the past few years, this decrease may provide a much-needed financial reprieve.
The falling cost of new rental agreements in Inner London means that for many tenants, moving into a new property may be a more cost-effective choice than renewing an existing tenancy. Traditionally, tenants have chosen to stay put to avoid the hassle and expense of moving. However, with rental prices dropping on new lets, many may now find that relocating offers better value, particularly in areas where renewal rates remain high.
On average, the monthly cost of moving into a new home in Inner London now stands at £2,647 per calendar month (pcm). This figure is 3.5% lower than the cost faced by tenants who choose to renew their contracts with their existing landlords. The difference may seem small, but over the course of a year, the savings could be substantial. For those who are not tied to a particular location, exploring new rental options could lead to a better deal and even an upgrade in living conditions.
Nationally, while the cost of renewing a rental contract continues to rise at a faster pace than the cost of moving into a new property, tenants who stay put still tend to pay less overall. The average rent on contract renewals has increased by 5.6% over the past year, but in many cases, it remains more affordable than signing a new lease. Currently, the typical renewal rent is £93 pcm lower than the cost of moving into a new home, providing an incentive for many renters to stay put despite rising costs.
These shifts in rental trends reflect broader economic changes affecting both landlords and tenants. With inflationary pressures and interest rate fluctuations influencing the housing market, some landlords may be more willing to negotiate lower rental prices to avoid extended void periods. At the same time, tenants are becoming more discerning, weighing their options carefully to secure the best possible deal in an evolving market.
For renters considering their next move, there are several key factors to keep in mind. While moving to a new property may result in immediate savings, additional costs such as deposits, agency fees, and relocation expenses must also be considered. On the other hand, staying in a current rental may offer stability, but tenants should be aware of potential rent increases at renewal. Carefully comparing these factors is crucial in making the right financial decision.
As the rental market continues to shift, tenants will need to stay informed about price trends in their area to make the most cost-effective choices. Whether it’s securing a better deal by moving or negotiating with an existing landlord, understanding the latest rental data will be key in navigating the housing landscape. With London rents showing signs of softening and national renewal costs continuing to rise, renters are in a strong position to reassess their options and take advantage of the changing market.
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