The annual pace of rental growth on newly let homes in Great Britain continued to slow in April, with growth falling from 6.7% in the year to March to 6.4% according to lettings agency Hamptons.  

However, rents edged up 0.8% month on month, the largest increase this year. 

Hamptons says annual growth looks set to stabilise around the 6% mark, which is significantly higher than the 2.5% average annual growth rate recorded pre-Covid.

Strong rental growth on the open market means it has taken an average of 20 months for the average rent to rise by the equivalent cost of an extra bedroom.  This essentially means that tenants have lost a bedroom with the average one-bed now costing the same as the average two-bed did 20 months ago.  

And the average two-bed rent has also risen to the level of the average three-bed rent 20 months ago.

When rental growth for newly let homes peaked late last year, it took just 14 months for average rents to rise by the equivalent of a bedroom.  This is the shortest period on record since the Hamptons lettings index began.  

This compares to an average of between 50 and 70 months pre-Covid when rental growth was typically running at between 2% and 3%.

Aneisha Beveridge, head of research at Hamptons, says: “Many tenants had enjoyed years of no or below-inflation rent increases, particularly when rents weren’t rising much on the open market and mortgage costs were falling.  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 meant that the gap between market rates and what some tenants were paying rose significantly.

“Tenants fortunate enough to be protected from higher rents by their landlord or longer contracts are increasingly seeing their rents rise.  These increases for renewing tenants tend to be lower and stretched over a longer period than for newly let homes, often meaning tenants still pay below market rate.  But even so, these hikes can still add up to hundreds of pounds a month.

“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.”