The Evolving UK Rental Market: Key Trends in 2024

As we progress through 2024, the UK rental market is undergoing significant changes, signaling the end of the rapid rent hikes that have dominated recent years. This analysis explores the major trends shaping a more balanced and sustainable environment for both renters and landlords.

Falling Rents in Major UK Cities

In a surprising shift, rents are starting to drop in several major cities, including London, Brighton, Glasgow, Nottingham, and Worthing. Notably, London has seen rent reductions in a third of its boroughs. This marks a turning point, indicating that the UK has moved beyond the peak of rental inflation.

For the first time in three years, the pace of rent increases has slowed considerably. Across the UK, rents are expected to rise by only 3-4% in 2024—a significant slowdown compared to the sharp increases of 11% in 2022 and 8% in 2023. This cooling market provides much-needed relief for renters, who have been facing rent increases that have outpaced wage growth in recent years.

A Shift from a ‘Red-Hot’ to a ‘Hot’ Market

The once “red-hot” rental market is now cooling, although demand remains strong. Over the past year, demand for rented homes has dropped by 39%, though this decline follows an unusually high peak. Despite this, the market remains competitive, with 17 potential tenants still vying for each available property—double the pre-pandemic average from 2017-2019.

At the same time, the supply of rental properties has slightly increased, up by 17% over the past year. This increase is driven in part by corporate landlords acquiring more properties and by lower mortgage rates, which have enabled some renters to buy their first homes, freeing up rental properties. However, the overall availability of rental homes continues to be a challenge, with the average estate agent still listing a third fewer properties than before the pandemic.

Slowing Rent Increases

Over the past year, rents for new leases have risen by 5.7%, reaching an average of £1,232 per month across the UK. However, the pace of these increases has slowed, with just a 1.6% rise in the past six months—the slowest rate of increase since 2021. The market is cooling primarily due to affordability pressures, and if this trend continues, rents are expected to rise by just 3-4% over the course of 2024.

Regional Differences in Rent Trends

Regional differences in rent trends are becoming more apparent. Rent inflation has slowed in 75% of cities across the UK, influenced by changes in local supply and demand, fewer overseas students, and a softer job market. In some areas, rents have reached levels that tenants are unwilling to pay, leading to decreases in cities like Nottingham, London, Worthing, Brighton, and Glasgow.

Despite these declines, some cities continue to experience strong rent growth. For example, in Bradford and Liverpool, where rental properties still offer good value, rents have continued to rise. Similarly, in more affordable suburbs and larger cities, we see continued rent increases, with places like Rochdale, Doncaster, Sunderland, Southend, and Telford recording inflation rates exceeding 4% in the first half of 2024.

London: A Complex Picture

London remains the most expensive rental market in the UK, with average monthly rents at £2,172—nearly 70% higher than the national average. However, even London is not immune to the broader trends affecting the rest of the country. Rent prices have fallen in more than a third of London boroughs, particularly in inner east London areas like Tower Hamlets, Newham, and Greenwich. The slowdown in rental inflation across London can be attributed to several factors, including an increase in the supply of rental properties due to corporate investments and the affordability constraints faced by many tenants.

Interestingly, while inner London areas are seeing declines or slower growth, outer London boroughs such as Merton and Havering are still experiencing higher growth rates. This growth is likely driven by these areas' relative affordability compared to the London-wide average, making them more attractive to renters.

Conclusion: A New Chapter for the UK Rental Market

The UK rental market is entering a new phase characterized by slower rent growth and a more balanced supply and demand dynamic. For renters, this shift offers some relief after years of rapid rent increases. For landlords, it signals the need for strategic adjustments to navigate this changing landscape. As we move through 2024, all stakeholders in the rental market will need to adapt to these changes, ensuring they can meet the challenges and opportunities that this new era presents.