The level of rents remains elevated. But the rate of growth has varied depending on whether a tenant is moving into a new home or renewing their current tenancy.
The average rent on a newly-let property today is 6.4% higher than a year ago. However, those who are renewing an existing contract are facing an average rise of 8.3%.
Around 62% of landlords who let a property to a new tenant this year are benefiting from a rent increase. By contrast, 88% of tenants who renegotiated their existing contract are paying more in rent.
Renewing tenants are paying an average of £1,159 a month - which is still 13% less than those who are moving into a new home. This saving of £178 a month, which works out at £2,135 over a year, is proving an incentive to stay put.
Moving means getting less home for more money, and, as a result, the number of renters relocating has fallen to levels last recorded during the pandemic.
The English Housing Survey reports that in 2022-23, 1.01 million (15% fewer) tenants moved home compared to an average of 1.19 million in the period between 2015 and 2019. Our analysis suggests that, in 2023-24, the number of renters moving home will fall below 1m and be about 17% below the pre-pandemic average.
Many sitting tenants had enjoyed years of no or below-inflation rent rises. But as a consequence of a steep rise in open-market rents, a gap has opened up between what they have been paying and the typical rent in their area.
Since May 2018, open market rents have risen by 38%, while rents on existing tenancies are up by 21%. This gap has started to close, but the difference between what sitting tenants and new tenants are paying remains high compared to historic levels. The gap may take longer to narrow should rental growth pick up again.
Rental growth for newly-let homes peaked at 12.0% in August 2023. However, since then the pace has nearly halved to 6.3%. This suggests that yearly growth may settle at about 6%, which would be well above the pre-pandemic average of just 2.5%.
" The number of renters relocating has fallen to levels last recorded during the pandemic."
It is striking to note that, such has been the surge in rents, that the cost of a one-bedroom home is the same as renting a two-bedroom home 20 months ago. The cost of a two-bedroom home has also leapt to the same level as a three-bedroom home 20 months ago.
In the pre-pandemic era, when rents tended to go up by 2-3% a year, it took 50-70 months for the cost of renting a one-bedroom home to climb to that of a two-bedroom property.
The supply of properties to let is 28% higher than a year ago, although this represents a deterioration in conditions since January when stock was 38% higher year-on-year.
Longer-term, downward pressure on the number of homes available to rent is set to persist. There were 39% fewer homes available to rent in May 2024 than in May 2019 because private landlords have sold more properties than they have bought. Not only this, but homes tend to sit on the market for shorter periods.
" Renting a one-bed flat today, costs the same as a two-bed 20 months ago."
These conditions have driven rents upwards in all regions, the only exception to this being Inner London. Here, rents on newly-let properties fell by 2.3% over the year to May. This is the second consecutive month of annual decline since the easing of lockdown at the end of 2021. But this slowdown is not surprising in light of the 35% surge in Inner London rents since 2021.