Market report February 2024 – are rents really falling?

Industry reports suggest that rental growth is slowing after last year’s boom, with some analysts even suggesting that it has gone negative. Meanwhile, the residential sales market appears to be gathering steam after a slow 2023.

• Insurance firm HomeLet grabbed headlines this month with a report that rents have fallen for three months in a row. According to the company, which tracked pre-existing rents as well as new rents, there was a fall of 0.6% in January nationwide month-to-month – and 2.2% in London.
• However, it’s unclear why rents would be falling. Demand from tenants appears to be up. Research by the National Residential Landlords Association found that 63% of landlords saw increased demand in Q4 2023, while the Royal Institution of Chartered Surveyors (RICS) also reported rising demand in January – as well as slowing but still positive rental growth.
• Meanwhile, the Office for National Statistics has published its figures for December 2023 rental growth. Private rents grew by 6.2% year-on-year, unchanged from November but still the joint highest recorded since their Index of Private Housing Rental Prices began in 2016. However, this is annual data whereas HomeLet’s is monthly and more recent.
• Halifax reports that year-on-year house price growth was 2.5% in January 2024. That’s the fastest growth seen since January 2023, and marks four consecutive months of rises.
• Demand indicators from RICS also suggest that this year’s sales market will be more active than 2023’s. According to their January UK Residential Market Survey, new buyer inquiries were up 7% year-on-year, while agreed sales had risen 5%.
• The improving sales figures have been partly credited to falling interest rates. However, these are still at the highest point since the 2007-8 financial crisis – and for many landlords, the damage has been done. According to lending industry body UK Finance, 500 buy-to-let properties were repossessed by lenders in Q4 2023, 11% higher than the previous quarter. Another 230,000 BTL mortgage holders are due to come off fixed rates this year, which will have been set at much lower interest rates.