The average advertised rent has hit another record level even as landlords exit the buy-to-let sector amid fears of capital gains tax hikes in the Autumn Budget.
But some buy-to-let landlords are still having to cut rent to attract tenants, research suggests.
The latest Rental Trends Tracker from Rightmove, reveals that the average advertised rent for new properties coming to the market has hit a new quarterly record between July and September 2024, with the average rent outside of London now £1,344 per calendar month.
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This marks a 5.2% increase from a year ago but it is the slowest rate of growth seen since 2021.
In London, rents have also reached a new record, with an average of £2,694 per month, a 2.5% annual rise.
The property website is warning that rents are likely to remain high as supply could be suppressed by more landlords exiting the sector.
Why are rents rising?
A continuing supply and demand imbalance is keeping rents high, even if growth is slowing.
This is exacerbated by Rightmove data showing that a record proportion of former rental homes are currently on the market for sale, at 18% compared with 8% in 2010.
It comes as landlords may be fearing capital gains tax hikes in the Autumn Budget at the end of October as well as changes from the Renters’ Rights Bill and new energy efficiency regulations.
“While we’re seeing some signs of improvement in the market’s chronic levels of demand and supply imbalance helped by a slight increase in the number of available rental properties, affordability remains a key challenge for renters as prices continue to hit new records,” says Rightmove’s director of property science Tim Bannister.
“Tenant competition has eased slightly from last year, but the market is still far from balanced.”
Is buy-to-let still worth it?
Landlords have faced plenty of pressure in recent years, with extra stamp duty charges on buy-to-let purchases and restrictions on mortgage interest relief.
New regulations in the Renters’ Rights Bill will also make It harder to evict tenants,
Meanwhile, lower mortgage rates have made it easier for many buyers to get on the property ladder.
The average number of tenant enquiries for each rental property available has fallen to 15, down from 23 at this time last year, Rightmove said.
But it is still almost double the eight recorded in 2019. Meanwhile the number of available rental properties is now 13% higher than last year, though still 27% below 2019, which is keeping rental growth down.
Additionally, the cost of living crisis is limiting how much tenants are willing to and can afford to actually pay.
A fifth of rental properties are currently seeing a reduction in the advertised rental price before finding a tenant, Rightmove said.
This compares with 16% last year and is the highest figure at this time of year since 2020.
“We are seeing some landlords choosing to exit the market with potential tax changes and stricter energy performance certificate regulations as additional factors in landlords’ decision-making,” adds Bannister.
“With rental supply under strain, incentivising landlords to invest in energy-efficient upgrades or offering tax relief could help maintain rental supply and, ultimately, ease affordability pressures for tenants."
Estate agency trade body Propertymark warns it has continually highlighted to government that worrying trends within the marketplace and that over regulation and additional pressures may damage future investment.
“Landlords have faced continuous financial and regulatory hurdles with many having to pass on certain costs by raising rents just to break even on their increasing expenditure,” says Nathan Emerson, chief executive of Propertymark.
“As the Renters’ Rights Bill makes its way through Parliament there is a danger it may not actually benefit all tenants and it’s important that full impact assessments are conducted. The UK government is right in pursuing reform within the sector to ensure higher standards; however, for this to work, there needs to be a balanced approach to protect both landlords and tenants equally.”
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