A leading lettings agency says 2023 was a record-breaking year for rental growth.  

The average rent on a newly let property in Britain rose 10.2 per cent year-on-year in December, marking the strongest end of year growth since Hamptons’ records began in 2014 and surpassing December 2022’s previous record of 7.7 per cent. 

This cost the average tenant who moved into a new home an average of £124 a month more in rent, equating to an extra £1,488 each year.

Rents have risen faster than inflation for the last nine months.  

Between March 2023 and November 2023 (when the latest Consumer Price Index inflation data was available) rental growth outpaced inflation by an average of 3.5 per cent each month.  This reversed the trend seen nine months previous when inflation reached a 41-year high.  

Pre-Covid, however, rents were rising at an average of 1.1 per cent faster than inflation each year.

While the pace of rental growth has cooled a little from its 12.0 per cent peak in August, it hasn’t slowed as quickly as inflation and there are few signs that it’ll significantly slow any time soon, says the agency.  

The rise in rents predominantly reflects higher landlord costs coupled with a lack of homes available to rent, which is unlikely to change significantly in the short to medium term.

On a regional basis, tenants in the East of England faced the biggest rent hikes. The average rent on a newly let property in the East of England hit £1,299 pcm in December, a record 13.3 per cent or £153 pcm more than 12 months ago.  

Rents in Greater London, the Midlands and the North of England also saw double-digit hikes in 2023.

Looking ahead, as mortgage rates continue their downward path, some of the upward pressure on rents should reduce.  This will predominantly occur because fewer landlords will face such steep increases in remortgaging costs as those who refinanced in 2023. 

However, lower rates might also enable more renters to become homeowners, reducing demand.  Even so, rents are likely to continue rising much faster than the pre-Covid average (2.6 per cent) over the next few years.  

Hamptons is forecasting rents on newly let properties across Great Britain to rise 7.0 per cent in 2024, followed by 5.0 per cent in both 2025 and 2026.

Aneisha Beveridge, head of research at Hamptons, says: “Pressures on the rental market show few signs of abating. Rental growth has been more persistent than wider inflation, predominantly due to the scale of the costs faced by most landlords as a result of higher interest rates.  

“Slightly lower mortgage rates in 2024 should alleviate some of these pressures and take some of the heat out of the rental market, but tenants will probably continue facing bigger rent increases than they did pre-Covid.”