It may not suit the narrative of some landlord-bashing groups but last month newly agreed rents across Britain fell by 0.4% year-on-year.
This is according to lettings agency Hamptons which says this is the largest annual fall post-Covid and the joint second-largest annual fall in rents since the agency’s record began in March 2011.
Now that rental growth has turned negative – and with the next inflation figure to be released on Wednesday – it means that there have been eight (likely nine, including August) straight months of rents rising more slowly than inflation as measured by the Consumer Price Index.
The latest available data shows that inflation rose 3.8% in July, outpacing stagnant annual rental growth in the same month (0.0%). August’s inflation figure, to be released the day after tomorrow, is likely to show an increase in CPI.
While rental growth was one of the fastest-increasing components of CPI during 2022 and 2023, it is now poised to place downward pressure on the headline inflation rate.
Rents are now falling in four of the 11 regions of Britain.
London, where rents have been decreasing on an annual basis in each of the last eight months, recorded the steepest falls (-3.3%). Inner London rents fell by 5.8% over the last 12 months, marking the largest decline since May 2021. Here, rents stand £179 per month below their October 2024 peak and 1.3% below where they were two years ago.
Yorkshire & Humber (-0.5%) and the North East (-0.2%) also saw annual declines for the first time since November 2019 and February 2020 respectively.
Rental growth in other regions remained in positive territory, despite the rate of growth slowing.
Aneisha Beveridge, Head of Research at Hamptons, says: “After several years of rapid rental growth, the tide is finally turning. For the ninth month in a row, rents have risen more slowly than inflation—offering tenants a rare moment of financial respite. While the monthly savings may seem modest, they mark a significant shift in the rental market’s role in driving inflation.
“Over the longer term, rents have consistently outpaced inflation, which means tenants today are paying more than they would have if rents had simply tracked CPI. For the most part, this has mirrored the rising cost pressures facing landlords.
“But this recent slowdown suggests the market is recalibrating. With affordability stretched and demand softening, landlords are having to adjust to attract tenants.
“Like wages, rents don’t often fall. In fact, there have only been six months over the last 14 years when rents have fallen nationally on an annual basis. And when they do, it’s usually in real terms, rather than absolute terms.
“What we’re seeing now is a real terms fall in rents – when inflation and wages outpace rental growth – which leaves tenants feeling better off. It’s a sign that the rental market is responding to wider economic pressures, and it could help ease the inflation headache for policymakers in the months ahead.”
This article is taken from Landlord Today