Rental Growth Slows Down in 2024 After Strong Recovery Post-Covid

Landlords have faced numerous challenges in recent years, from higher mortgage rates to reduced tax relief options. Despite these difficulties, one area that provided some stability was rental growth. Following the impact of the Covid-19 pandemic in 2020, rental growth rebounded quickly in 2021 and remained robust for the next three years. By August 2023, rents on newly let properties in Great Britain had surged by 12 per cent year on year, as reported by Hamptons data.

However, the scenario shifted in 2024, with rental growth slowing significantly. In December of that year, rental growth across Great Britain stood at just 2 per cent, marking the lowest rate since October 2020.

With a period of rapid growth, it was expected that rents could not sustain double-digit increases indefinitely. Hamptons noted that there was approximately a 10 per cent increase in rental homes on the market in 2024 compared to the previous year.

Despite the rise in stock levels, indications suggest that the recovery has reached its peak, with the number of homes on the market still 13 per cent lower than in 2019, according to Hamptons.

Aneisha Beveridge, head of research at Hamptons, commented, “The pace of rental growth continues to moderate, aligning with house price increases. However, the plateau in stock levels indicates positive rental growth. While new purchases by landlords remained steady in December, early data from January hints at the impact of the new 5 per cent stamp duty surcharge, which could drive further rental growth in the upcoming months.”

Looking ahead, the possibility of rental growth rebounding in 2025 remains uncertain, given the current market conditions. Many landlords are contemplating selling their properties, and investing in buy-to-let properties may not be as appealing due to high mortgage rates and the recent stamp duty increase.

On the legislative front, the renters’ rights bill recently passed through the House of Commons and is now being reviewed in the House of Lords. While landlords have largely accepted the bill, which includes the abolition of no-fault evictions, a new provision limiting the amount of rent landlords can request in advance has sparked debate. Critics, including the National Residential Landlords Association (NRLA), argue that this could make renting challenging for tenants without a UK credit history or those with short-term or variable employment.

Expected to become law in the spring, the renters’ rights bill adds to the existing challenges faced by the buy-to-let sector. Despite these obstacles, landlords continue to navigate a complex and evolving rental market.