Tenants in Britain are now encountering steeper rent increases when renewing their existing contracts compared to moving to new properties, recent data reveals. This shift comes as landlords adjust rents closer to open market rates.
According to data from estate agent Hamptons, tenants who renewed their contracts in Great Britain experienced an average rent increase of 8.3% over the 12 months leading up to April 2024. This rise surpasses the average rental growth for newly let properties, which stood at 6.4%.
Rental growth for new leases hit a peak of 12% last August, driven by landlords responding to higher mortgage rates by either selling their properties or passing on increased costs to tenants. Consequently, the rental market has seen a 40% decrease in available homes compared to April 2019.
Hamptons’ data also highlighted that 88% of tenants renewing their contracts this year have faced rent increases. In contrast, only 61% of landlords secured higher rents with new tenants, a drop from 80% in 2023. Despite the rent hikes, tenants renewing their contracts still pay an average of 13.4%, or £178 per month, less than those moving to new properties. This disparity partly explains why fewer tenants are relocating.
While the annual rate of rental growth for newly let properties slowed in April, rents still rose by 0.8% month-on-month, marking the largest increase this year. Hamptons suggested this indicates the annual rental growth rate may stabilize around this level.
Aneisha Beveridge, head of research at Hamptons, remarked, “Landlords were often content with a small gap between the market rate for their home and what their tenant was paying. However, over the last two years, strong rental growth on the open market has significantly widened this gap.”
She added, “The large gap between market rates and what many tenants are paying is a big disincentive for them to move unless they have to. Moving increasingly means getting less home for more money. While time will eventually close the gap between what sitting and new tenants are paying, it may take longer if rental growth on the open market starts picking up again.”
Nationally, the number of rental homes on the market rose by 28% year-on-year in April, though this growth has slowed from a peak of 34% in January. Inner London was the sole region to record a decline in prices for newly let properties last month, dropping 2.8% compared to the same period last year. This marked the region’s first year-on-year fall since the end of Covid-19 lockdowns in late 2021, after which rents surged by 35%.