Research from Hamptons shows that the number of tenants registering in lettings branches across Great Britain is 17% down year-on-year and 28% below 2019 levels.
The report noted that this was the 12th consecutive month in which tenant demand was lower than the same period last year.
Tenant demand in more affluent areas has fallen 50% more than in the least affluent areas. Hamptons posited that these were areas where people were more likely to buy.
Hamptons added that prospective first-time buyers have been buoyed by falling mortgage rates, which has pushed the monthly cost of a mortgage below the cost of renting.
The report said those with a deposit of at least 10% are “likely to find themselves better off buying than renting”.
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Hamptons noted that so far this year, there have been an average of one-and-a-half tenants registering to find somewhere for each prospective first-time buyer.
The research showed that this figure has nearly halved since mortgage rates peaked in 2022 and 2023. This was attributed to falling tenant numbers and increased buyer demand from first-time buyers.
The ratio of new tenants to first-time buyers was the highest in the North East, Yorkshire and the Humber and the South East.
At the other end of the spectrum were London, Scotland and the East of England.
The report added that at the end of May, there were 5% more homes on the rental market compared to the same period last year.
The number of available homes to rent has grown annually every month since August 2022, despite a fall in new buy-to-let (BTL) purchases.
The growth in supply shows that homes are taking longer to let due to weaker demand.
Hamptons said the average rent on a newly let property in Great Britain rose 1.5% over the last 12 months to £1,366 per month.
The report said this showed that rents are growing at a similar pace to 2013, when they rose by an average of 1.6%. In May 2024, average rents increased by 5.1% annually, indicating that the pace of growth has declined by nearly two-thirds over the last year.
Rental growth at renewals rose faster than new lets, with tenants staying put seeing a rent rise of 3.7% to £1,267 per month. Consequently, the average tenant reviewing a contract is paying £99 per month less than a tenant moving into a new home.
‘Rental growth is unlikely to cool much further’
Aneisha Beveridge, head of research at Hamptons, said: “In a similar trend to the years following the last economic downturn, falling interest rates have reduced the pace of rental growth. Landlords rolling off short-term fixed rate mortgages are now seeing their monthly payments fall, reducing the need to pass on further costs to tenants.
“At the same time, lower mortgage rates are changing the arithmetic for tenants who are thinking about buying. While rates remain high relative to pre-Covid times, three years of above-inflation rental growth mean that for most, buying remains cheaper than renting. This has boosted first-time buyer numbers and reduced demand in the rental sector.”
She continued: “It has taken the best part of two years for the pace of rental growth to fall from double digits down to 1.5%. This means that rents are now rising at a rate that’s close to their long-term average and suggests that the era of rapid rental growth is behind us for now.
“That said, rental growth is unlikely to cool much further. While falling interest rates should take the sting out of rental growth over the next few years, landlords will likely continue to price in political risk. Landlords are increasingly getting their heads around what the Renters’ Rights Bill will mean for them, but the way it plays out for landlords in reality will shape future investor appetite.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Tenant demand cooling as FTB outlook improves, Hamptons says
