"Landlords will need to balance any rent rises with what tenants can afford to pay in their local area, to continue to find tenants quickly and avoid any periods where their home is empty due to tenants not being able to meet the asking rent"
The rises seen in 2022 are the second largest year on record for rent growth behind only 2021. However, according to Rightmove, there are signs that the pace of rent growth is beginning to ease, as the final quarter’s rise of 0.9% compared with the previous three months is the smallest quarterly increase for two years.
In London, average asking rents accelerated in growth in the final months of the year, rising by 5.8% compared with the previous quarter, taking average asking rents for new tenants to a new record of £2,480 pcm. In Inner London, which includes some of the capital’s most expensive areas, average asking rents surpassed £3,000 pcm for the first time.
One of the biggest frustrations for both tenants and agents has been the lack of available properties. Though it is early days, there are signs that this may be starting to ease compared to the record low levels of last year.
The number of available properties to rent in December was 13% higher than in the same period the previous year. New properties coming up for rent were also up 5% in December compared with December 2021, while the number of tenants looking for a property to rent is 7% higher over the same period.
Though it is still tough, the result of this additional property to rent is that it may feel slightly easier for tenants in some parts of Great Britain to secure a property than it did at this time last year.
Competition between tenants for the properties available has dropped by 6% compared with this time last year, and by a third (33%) compared with the peak in September, when the gap between supply and demand was at a record high.
Wales (+15%) and the South West (+13%) have seen the biggest jumps in new properties to rent regionally, which has led to a slight drop in respective average asking rents of 1%. This is the first quarterly drop in average asking rents for any region since the beginning of 2021.
Despite these positive signs, the imbalance between supply and demand is still very high. The number of properties to rent is down by 38% compared with pre-pandemic 2019, while the number of people enquiring about a property to rent is 53% higher.
Owing to this ongoing imbalance between the number of people who are looking for a home to rent, and the number of properties to rent available, Rightmove predicts average asking rents for newly available properties will rise by a further 5% in 2023.
Though historically this would be a significant rise in annual asking rent growth, it would mark a slowing in the pace of growth from the previous two years.
Demand remains very strong, but there are signs of more properties to rent compared with last year, which would ease competition and the pace of rent rises this year.
However, it would take a significant addition of new homes to rent to bring the gap between supply and demand anywhere close to a better balance this year and bring annual rent growth back towards the pre-pandemic five-year average of around 2%.
Tim Bannister, Rightmove’s Director of Property Science, said: “Although the fierce competition among tenants to find a home is starting to ease, it is still double the level it was back in 2019. Letting agents are seeing extremely high volumes of tenant enquiries and dealing with tens of potential tenants for each available property.
“Landlords will need to balance any rent rises with what tenants can afford to pay in their local area, to continue to find tenants quickly and avoid any periods where their home is empty due to tenants not being able to meet the asking rent.
“There appears to be some more property choice for renters compared to the record low levels of last year which would slightly ease the fierce competition to secure a home. This is why we’re forecasting that the pace of annual growth will ease to around 5% by the end of the year nationally, although this would still significantly exceed the average of 2% that we saw during the five years before the pandemic.”
