Average advertised rents outside London have exceeded £1,400 a month for the first time, although annual rental growth has slowed considerably from the levels recorded in recent years, according to Rightmove.

The property portal’s latest figures show that the average advertised monthly rent outside the capital has reached £1,418, following a quarterly increase of 1.5%. Annual growth now stands at 2.4%, compared with increases of around 10% recorded between 2021 and 2023.

London is experiencing stronger rental inflation, with average advertised rents reaching a record £2,825 per month. Annual growth in the capital has accelerated to 3.2%, making it the third fastest-growing region in Great Britain.

The divergence reflects differing supply and demand conditions. Across the national market, the number of available rental properties is 2% lower than a year ago, while tenant demand has fallen by a similar proportion.

In London, however, the total stock of available rental properties has declined by 9% annually, with newly advertised homes down 7%. Tenant demand has simultaneously increased by 6%, creating greater competition for available accommodation.

LANDLORD INVESTMENT REMAINS SUBDUED

Rightmove’s analysis also points to continuing constraints on investment in the private rented sector, although there is little evidence of a significant acceleration in landlords disposing of properties.

Properties previously advertised for rent account for approximately 13% of homes currently listed for sale, broadly unchanged during this year and only marginally above the 12% recorded a year earlier.

However, the proportion of rental listings that were previously advertised for sale has fallen from 17% to 15%, suggesting fewer properties are being transferred into the rental market.

Higher financing costs remain an obstacle to investment. The average two-year fixed buy-to-let mortgage rate has risen to 5.34%, compared with 4.16% before the outbreak of the war in Iran.

The increase has made further property acquisitions less attractive for some landlords, particularly where rental yields are already under pressure or prospects for capital appreciation are limited.

It also presents challenges for existing investors refinancing properties purchased or remortgaged when borrowing costs were substantially lower.

Matt Smith, mortgage specialist at Rightmove, said: “One of the biggest challenges for many landlords at the moment is managing the properties they already own when the time to remortgage comes around.

“New buy-to-let investment has been relatively subdued for some time, and some landlords are still reaching the end of much cheaper fixed-rate deals taken out when borrowing costs were lower.

“For those landlords, moving onto a higher mortgage rate can have a significant impact on monthly costs and rental yields. With rent reviews now generally limited to once a year, landlords need to plan carefully alongside refinancing.

“Where the numbers no longer add up, higher mortgage costs could ultimately influence decisions about whether to remortgage or sell a rental property.”

A MORE BALANCED MARKET OUTSIDE LONDON

Despite the latest rental records, Rightmove’s figures suggest that conditions across much of Great Britain have become more settled following the sharp increases experienced during the earlier post-pandemic period.

Rental growth remains strongest in many lower-priced locations, where rents have greater scope to increase before reaching the affordability constraints evident in more expensive markets.

London’s renewed growth represents a change from the recent pattern, when rental inflation was generally stronger outside the capital. The recovery in London demand follows an earlier period of weaker activity during the pandemic and a subsequent rebound as tenants returned.

Rightmove suggests that employment opportunities and requirements for office attendance may be supporting demand in London, while higher mortgage costs and subdued sales market activity could be encouraging some tenants to remain in rented accommodation for longer.

Colleen Babcock, property specialist at Rightmove, said: “Average rents have reached another new record and have now surpassed £1,400 per month outside London for the first time.

“However, beneath the headline figure, rental growth has continued to settle compared with the exceptionally fast pace we saw a few years ago.

“Supply remains constrained, which is continuing to put upward pressure on rents, but demand is also more measured. That has helped to create a more balanced market overall, even though affordability remains a challenge for many renters.”

PROPERTYMARK WARNS OVER LONG-TERM SUPPLY

Industry representatives have cautioned that slowing rental inflation does not address the underlying shortage of available properties or the financial pressures facing landlords.

Kim Lidbury, president of ARLA Propertymark, said: “The latest figures highlight why the rental market needs to be judged on more than the rate at which rents are rising.

“Although rental growth has moderated, advertised rents remain at record levels, and the availability of suitable homes continues to be a major concern for tenants.

“The cost and complexity of providing rental housing remain important considerations for landlords. Financing costs, taxation and regulatory requirements all influence decisions about whether to invest in, retain or sell rental property.

“These pressures can have wider implications for the availability and choice of homes for tenants.”

Lidbury also highlighted the importance of letting agents in supporting landlords with their responsibilities and maintaining standards across the sector.

She added: “Ultimately, the priority is to ensure there are enough good-quality homes available to rent, at a range of price points, while maintaining a rental sector that works for both landlords and tenants.

“A slowdown in rental growth is welcome, but it will not, on its own, resolve the affordability challenges facing renters.”