Rental prices in the UK have reached a 10-year high, but data suggests that rental inflation for new lets is set to slow to 4-5% later this year. This article will explore the current state of the UK rental market, focusing on key takeaways, rental prices in London, and affordability.
Key takeaways:
The average rent for a newly-let property reached £1,120 in February 2023, up from £1,010 a year ago.
London is the most expensive city to rent, with an average new let costing close to £2,000 per month.
Smaller towns and cities offer more affordable alternatives to regional cities, with savings of hundreds of pounds available.
Rental inflation for new lets is expected to slow to 4-5% later this year.
Rental prices across the UK:
In February 2023, the average cost of renting a newly-let property continued to increase across the country. The average rent is now £1,120, which is £110 higher than in February 2022, an increase of 10.9%. This rise is a result of higher levels of demand for rental homes, particularly in the UK’s largest cities, yet the stock of homes advertised ‘to rent’ remains on a par with last year.
Rental prices in London:
London remains the UK’s most expensive place to rent a home, with average rents costing close to £2,000 per month. However, the pace at which rents are increasing is now lower than it was last summer (14.9% vs 17.6%). The monthly cost of a new let in the capital is currently £260 higher than it was a year ago. Renters looking to settle in more expensive inner London boroughs should be prepared for even larger increases. The average monthly rent in Westminster and Kensington and Chelsea is now £410 higher than it was in February 2022. The cheapest place to rent in London right now is Bexley, where the average monthly rent is £1,375.
Affordability:
Average rents above £1,000 are now seen in all southern regions, including London, the South East, the East of England, and the South West. However, smaller regional cities can often offer better value for money. For instance, the average newly let property in Ipswich is £630 cheaper than in Cambridge, the most expensive city to rent in East England. While rental growth is substantial, the Office for National Statistics’s Index of Private Housing Rental Prices, which captures a mix of existing and new lets, shows a more modest increase of 4.9% over the last 12 months.
Future rental market outlook:
While the scarcity of homes for rent is expected to continue over 2023, rental demand is unlikely to be as strong as last year given the current weaker economic growth. Average rents expressed as a percentage of earnings are now at or close to ten-year highs in all regions except London, indicating that renters cannot afford to pay much more, especially given the cost-of-living pressures. As a result, the pace of rental growth is expected to slow to 4-5% by the year-end. A faster slowdown in rents in inner London and some inner-city areas could develop later this year as stretched affordability combines with increases in supply and slower job growth.
