Advertised rents have hit record highs across Britain. But rising mortgage costs and weaker landlord investment are raising fresh concerns about rental supply.
New figures from Rightmove show average advertised rents outside London have exceeded £1,400 a month for the first time. Rents now stand at £1,418, following a 1.5% quarterly increase.
However, annual rental growth has slowed to 2.4%. This marks a sharp contrast to the double-digit increases recorded between 2021 and 2023.
The national rental market is showing signs of stabilisation. Available rental stock is down 2% year-on-year, while tenant demand has fallen by the same proportion.
London, however, is moving in the opposite direction.
Average advertised rents in the capital have reached a record £2,825 per month. Annual growth has accelerated to 3.2%.
The figures reveal a widening gap between supply and demand. Available rental properties in London have fallen by 9% over the past year. New listings are down 7%, while tenant demand has increased by 6%.
London now ranks third among Britain’s regions for annual rental growth, despite already having the country’s highest rents.
Landlord investment shows signs of weakening
Rightmove’s figures also point to a potential slowdown in landlord investment.
Around 13% of homes currently advertised for sale were previously listed for rent. This proportion has remained broadly unchanged throughout the year, although it is slightly above last year’s 12%.
The reverse trend is more concerning for the lettings sector.
The proportion of rental properties previously advertised for sale has fallen from 17% to 15%. This suggests fewer properties are moving from the sales market into the private rented sector.
Higher borrowing costs are adding to the pressure.
The average two-year fixed buy-to-let mortgage rate has climbed to 5.34%. That compares with 4.16% before the outbreak of war in Iran.
The 1.18 percentage point increase is squeezing rental yields and making further property investment less attractive.
It also presents a growing challenge for landlords refinancing mortgages secured when borrowing costs were considerably lower.
Higher mortgage rates put landlords under pressure
Matt Smith, Rightmove’s mortgage expert, warned that refinancing costs could influence whether landlords retain or sell their properties.
He said: “One of the biggest challenges for many landlords at the moment is managing the properties they already own when the time to remortgage comes around. New buy-to-let investment has been relatively subdued for some time, and some landlords are still reaching the end of much cheaper fixed-rate deals taken out when borrowing costs were lower.
“For those landlords, moving onto a higher mortgage rate can have a significant impact on monthly costs and rental yields. With rent reviews now generally limited to once a year, landlords need to plan carefully alongside refinancing. Where the numbers no longer add up, higher mortgage costs could ultimately influence decisions about whether to remortgage or sell a rental property.”
Kim Lidbury, president of ARLA Propertymark, warned that slowing rental growth should not obscure wider pressures facing landlords and tenants.
She said: “The latest figures highlight why the rental market needs to be judged on more than the rate at which rents are rising. Although rental growth has moderated, advertised rents remain at record levels, and the availability of suitable homes continues to be a major concern for tenants.
“The cost and complexity of providing rental housing remain important considerations for landlords. Financing costs, taxation and regulatory requirements all influence decisions about whether to invest in, retain or sell rental property. These pressures can have wider implications for the availability and choice of homes for tenants.”
Lidbury said a sustainable rental sector required a balance between protecting tenants and ensuring responsible landlords could continue operating.
She added: “A slowdown in rental growth is welcome, but it will not, on its own, resolve the affordability challenges facing renters.”
Colleen Babcock, property expert at Rightmove, said rental growth had moderated despite the latest record highs.
She commented: “Average rents have reached another new record and have now surpassed £1,400 per month outside London for the first time. However, beneath the headline figure, rental growth has continued to settle compared with the exceptionally fast pace we saw a few years ago.
“Supply remains constrained, which is continuing to put upward pressure on rents, but demand is also more measured. That has helped to create a more balanced market overall, even though affordability remains a challenge for many renters.”
London lettings market faces renewed squeeze
Kesha Foss-Smith, head of lettings at John D Wood & Co, said stronger tenant demand and fewer properties were increasing competition.
She said: “London’s rental market is showing renewed pressure, with rising tenant demand and fewer available properties increasing competition for the best homes. Higher mortgage costs are also keeping some would-be buyers in the rental sector for longer, adding to demand, particularly for smaller properties.
“Despite tighter supply, value for money remains critical. Tenants are increasingly discerning, especially at the upper end of the market, making realistic pricing and high-quality presentation essential.”
The picture is similar in parts of Manchester, although tenants are becoming increasingly price-sensitive.
Richard Antrobus, director at VitalSpace, said: “The rental market in South Manchester remains highly competitive, with demand continuing to outstrip the supply of quality homes.
“While rental growth has become more measured and tenants are increasingly price conscious, well-presented and realistically priced properties continue to attract strong interest.
“Higher mortgage costs and growing regulatory pressures are also making some landlords more cautious about expanding their portfolios, further limiting the supply of homes available to rent.”
Comments (1)
With inflation for the last 12 month sitting at 3.3% rents in real terms are going down.