London rents reach record high of £2,633 per month

The cost of average rental properties coming onto the market continues to rise rapidly, particularly in London, according to new data from property platform Rightmove (RMV.L). Average rental prices in the capital have hit a new record high of £2,633 per calendar month.

The latest data shows that rental prices across the country have hit new records for the seventeenth year in a row. Outside London, the average price is now £1,291 per month.

Although average prices are now 8.5% higher than a year ago, there are signs of a possible easing. The pace of rental growth has fallen for the second quarter in a row, with London experiencing a more significant slowdown in rental growth than the rest of the country.

Average rents in the capital are currently 5.3% higher than last year, with rental growth having steadily slowed since peaking at 16.1% in the third quarter of 2022.

“The rental market has not reached boiling point, but it is still simmering,” said Tim Bannister, director of property science at Rightmove.

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“If we look at the data for the market as a whole, we can see some slow improvements for tenants as they now have more choice and competition with other tenants slowly decreases.”

Supply bottlenecks for tenants

Although the supply and demand balance is slowly improving from its peak, almost 50,000 more rental properties are still needed to bring the UK’s rental supply back to pre-pandemic levels, according to Rightmove.

Current market statistics show that the number of rental properties available to tenants is 11% higher than the same period last year, but is still 26% lower than in 2019.

Likewise, the number of potential renters looking to buy a home to rent is down 17% from last year, but is still 54% higher than in pre-pandemic 2019.

“The pace at which new supply is coming onto the market is likely due to a combination of the relatively small number of new landlords on 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 a result, agents are still unable to meet tenant demand and are now receiving an average of 13 enquiries per rental property. This is less than last year (19) and still almost three times as many as in March 2019 (an average of five).

While average rents continue to rise, there are signs that rent affordability for tenants is being severely tested, with rent reductions currently at a five-year high for this time of year.

The story continues

The share of rental properties seeing their prices reduced is now 22%, up from 16% in the same period last year, and is the highest at this time of year since 2019, when it was 23%.

This suggests that more landlords will need to lower their asking rents to align with affordability in their local market.

The biggest price reductions are likely to be seen in the largest homes in the top end of the market, which includes four-bedroom detached houses and all properties with five bedrooms and above.

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A third (30%) of prime properties are currently experiencing a price reduction, setting a new record for this time of year dating back to 2012.

The news follows data showing average asking prices for UK homes rose 1.1% to £372,324 in April, despite prospective buyers facing prolonged pressure from rising 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 of a property for sale is now just £570 below the record £372,894 set in May 2023, while the annual price growth rate rises to 1.7%, the highest level in 12 months.

The increase was due to strong sales opportunities for the country’s most expensive homes, Rightmove said. The so-called “top of the ladder” sector recorded the strongest price increase since 2014.

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