London’s rental inflation appears to be on the wane as knowledge launched right now by Zoopla reveals rents within the capital elevated by 1.1 per cent within the 12 months to January.
Compared, in January 2024, rental inflation was up 5.1 per cent for the 12 months and, over the past 5 years, it’s been seven per cent. This backs up figures launched final week that indicated London had reached ‘peak lease’ and costs have been starting to return down. The common lease in London now sits at £2,166 a month.
“The common month-to-month lease in London now stands at £2,166, virtually £1,000 above the UK common of £1,284,” says Richard Donnell, government director at Zoopla.
“Rents are rising extra slowly in London attributable to affordability constraints. Earnings are rising quicker than rents (six per cent), which might be welcome information for renters who’ve confronted steep lease will increase over the past three years. The variety of houses for lease in London stays an ongoing problem given decrease yields and the rise in mortgage charges.
“There’s a danger that upcoming rental reforms will compound provide facet pressures additional, holding the strain on rents.”
The nice rental slowdown
This slowdown in rental progress was mirrored at a nationwide stage too. Rental inflation throughout the UK averaged at three per cent on new lets, down from 7.4 per cent a 12 months in the past, and the bottom stage it’s been for 3.5 years. The availability and demand stability can be narrowing with 11 per cent extra houses for lease and rental demand down 17 per cent on a 12 months in the past. The result’s 12 renters chasing every residence, 42 per cent lower than 2022-4 ranges however greater than what was seen pre-pandemic.
The very best lease will increase may very well be present in higher worth components of the nation, suggesting strapped-for-cash tenants are transferring right here to make the most of decrease costs. These included the components of the North East, the place rents have been up 6.3 per cent and Northern Eire with a rental inflation of 9 per cent. In addition to London, Scotland and the East Midlands additionally noticed gradual rental inflation.
Affordability, somewhat than an enchancment in provide, has been flagged as the explanation for this slowdown in lease rises. Annual UK rents have elevated by £3,000 within the final 12 months to £15,400 and cost-of-living knowledge reveals that dwelling prices for personal renters rose quicker than every other group in 2024. It appears folks simply can’t afford to pay any extra in lease. The forthcoming Renters’ Rights Invoice, adjustments to minimal EPC requirements for rental properties and continued tax adjustments imply that it’s unlikely that the provision of rental homes will improve considerably any time quickly, both.
“Simply as rising rents come underneath management after the roller-coaster trip of the previous couple of years, the Renters’ Rights Invoice threatens to inject extra inflation into the system. By focussing a variety of power and time on a small variety of unscrupulous landlords, the federal government might inadvertently make life tougher for tenants if provide falls and upwards strain on rents grows,” says Tom Invoice, head of residential analysis at Knight Frank.
The place are rents falling (and rising) in London?
The borough with the largest fall in rents was Greenwich. This royal borough encompasses a various set of areas, together with Blackheath (residence to the oldest golf membership in England), and riverside areas corresponding to Deptford and Woolwich. Rents right here fell 0.7 per cent to a median of £1,892.
The second largest faller was the interior borough of Tower Hamlets, which, regardless of its shut proximity to rising Hackney, dipped 0.6 per cent to £2,337. Lastly, rents within the Metropolis of London have additionally decreased. Renting in ‘The Sq. Mile’ would possibly nonetheless be costly – at £2,337 a month on common – but it surely’s down 0.3 per cent year-on-year.
The most important annual improve in rents was present in Havering, an outer east London space which advantages from the District Line to Upminster and the Elizabeth Line to Romford. Right here, rents have been up 4.6 per cent to a median of £1,648, making it the third most cost-effective place to lease in London.
Whereas Havering and Richmond are discovered on London’s edges, the east London borough of Hackney was the third largest riser with rents up 3.3 per cent to a month-to-month common of £2,413.
