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UK rent growth accelerated in October with London registering the largest increase, according to official data that suggests more pain for tenants after two years of rising costs.
Average private rents increased by 8.7 per cent in the 12 months to October 2024, up from 8.4 per cent in the 12 months to September 2024 and the fastest pace since April, the Office for National Statistics said on Wednesday.
Rent growth last month was only marginally below the record high annual rise of 9.2 per cent recorded in March 2024.
“Headline rents are still rising, partly due to continuing demand as well as landlord sales ahead of the Budget [last month],” said Jeremy Leaf, a north London estate agent.
He said he had encountered considerable resistance among tenants to paying higher rents given significant increases in costs over the past year or so. “As a result, in some cases, landlords have had to adjust their expectations, although the overall trend continues upwards.”
In the capital, the average monthly rent hit a record high, rising to about £2,200 — the highest since data collection began in 2005. Before UK inflation began to surge in October 2021, London rent was typically £1,700 a month. By contrast, the average rent in the North East rose from just under £600 to under £700 over the same period.
Rent inflation in London stood at 10.4 per cent in October, up from 9.8 per cent in September.
A leading survey of estate agents, released last week, found a sharp decline in landlord instructions in the three months to October, indicating fewer landlords were putting properties up for rent, adding to pressure on rental prices.
Landlords are facing higher interest rates and costs, which have squeezed their margins. At the same time, many households are struggling to save for a deposit after the rapid rise in house prices in the two years to 2022 and a surge in mortgage payments, which has pushed up rental demand.
Mortgage rates have increased sharply since 2021 as the Bank of England raised interest rates to curb high inflation. They have now come back from their summer 2023 peak, supporting a recovery in the housing market, although they have risen again in recent weeks.
The ONS reported that average UK house prices increased by 2.9 per cent, to £292,000, in the 12 months to September 2024 — a rise of 2.7 per cent on the previous month.
However, in the capital, where properties are the most expensive and affordability is lower, prices fell by an annual rate of 0.5 per cent in September to an average price of £525,586. London has underperformed the rest of the country since 2016.
Holly Tomlinson, financial planner at the wealth management company Quilter, said: “Affordability remains a key theme throughout the market, but first-time buyers face a particularly challenging landscape.
“With rates having gone up in the last few months despite a cut to the base rate, first-time buyers continue to have the rug pulled from beneath them.”