London’s rental inflation seems to be on the wane as data released today by Zoopla shows rents in the capital increased by 1.1 per cent in the year to January.
In comparison, in January 2024, rental inflation was up 5.1 per cent for the year and, over the last five years, it’s been seven per cent. This backs up figures released last week that indicated London had reached ‘peak rent’ and prices were beginning to come down. The average rent in London now sits at £2,166 a month.
“The average monthly rent in London now stands at £2,166, almost £1,000 above the UK average of £1,284,” says Richard Donnell, executive director at Zoopla.
“Rents are rising more slowly in London due to affordability constraints. Earnings are rising faster than rents (six per cent), which will be welcome news for renters who have faced steep rent increases over the last three years. The number of homes for rent in London remains an ongoing challenge given lower yields and the increase in mortgage rates.
“There is a risk that upcoming rental reforms will compound supply side pressures further, keeping the pressure on rents.”
The great rental slowdown
This slowdown in rental growth was mirrored at a national level too. Rental inflation across the UK averaged at three per cent on new lets, down from 7.4 per cent a year ago, and the lowest level it’s been for 3.5 years. The supply and demand balance is also narrowing with 11 per cent more homes for rent and rental demand down 17 per cent on a year ago. The result is 12 renters chasing each home, 42 per cent less than 2022-4 levels but higher than what was seen pre-pandemic.
The highest rent increases could be found in better value parts of the country, suggesting strapped-for-cash tenants are moving here to take advantage of lower prices. These included the parts of the North East, where rents were up 6.3 per cent and Northern Ireland with a rental inflation of nine per cent. As well as London, Scotland and the East Midlands also saw slow rental inflation.
Affordability, rather than an improvement in supply, has been flagged as the reason for this slowdown in rent rises. Annual UK rents have increased by £3,000 in the last year to £15,400 and cost-of-living data shows that living costs for private renters rose faster than any other group in 2024. It seems people just can’t afford to pay any more in rent. The forthcoming Renters’ Rights Bill, changes to minimum EPC standards for rental properties and continued tax changes mean that it’s unlikely that the supply of rental houses will increase significantly any time soon, either.
“Just as rising rents come under control after the roller-coaster ride of the last few years, the Renters’ Rights Bill threatens to inject more inflation into the system. By focussing a lot of energy and time on a small number of unscrupulous landlords, the government could inadvertently make life more difficult for tenants if supply falls and upwards pressure on rents grows,” says Tom Bill, head of residential research at Knight Frank.
Where are rents falling (and rising) in London?
The borough with the biggest fall in rents was Greenwich. This royal borough encompasses a diverse set of areas, including Blackheath (home to the oldest golf club in England), and riverside areas such as Deptford and Woolwich. Rents here fell 0.7 per cent to an average of £1,892.
The second biggest faller was the inner borough of Tower Hamlets, which, despite its close proximity to rising Hackney, dipped 0.6 per cent to £2,337. Finally, rents in the City of London have also decreased. Renting in ‘The Square Mile’ might still be expensive – at £2,337 a month on average – but it’s down 0.3 per cent year-on-year.
The biggest annual increase in rents was found in Havering, an outer east London area which benefits from the District Line to Upminster and the Elizabeth Line to Romford. Here, rents were up 4.6 per cent to an average of £1,648, making it the third cheapest place to rent in London.
While Havering and Richmond are found on London’s edges, the east London borough of Hackney was the third biggest riser with rents up 3.3 per cent to a monthly average of £2,413.