UK: London Rental Inflation Eases to Single Figures, Tenants Still Pay Record Prices

London rental inflation has dropped to single figures for the first time in five months, but tenants are still paying a record of almost £2,100 in June. Average prices rose 9.7% in the 12 months to June, with a 0.6% increase month-on-month.

London rental inflation has shown signs of easing, with the latest data from the Office for National Statistics revealing that the average price of renting a home in UK capital rose by 9.7% in the 12 months to June. This marks the first time in five months that rental inflation has dropped to single figures. In June, tenants in London paid a record of almost £2,100 ($2,738.7) per month, with rents increasing by 0.6% month-on-month, the smallest rise since November.

While the slowdown in rental inflation may bring some relief to tenants who have been grappling with sky-high rents and a cost-of-living crisis in recent years, the reality is that they are still facing exorbitant costs. Shortages of rental properties coupled with strong demand from individuals priced out of the owner-occupier housing market continue to put pressure on renters. London experienced the fastest annual increase in England, with the average private rent reaching £2,098 per month, nearly £350 higher than two years ago. Monthly rental payments are outpacing wage growth across the country, rising by 8.6% in England as a whole to an average of £1,310 in June.

Zoopla's latest report on the rental sector indicates that the gap between supply and demand is starting to narrow, although it remains significantly skewed. Meanwhile, data from the Land Registry shows that average house prices in May increased by 1.2% month-on-month to £285,201. This growth outpaced house price indicators from the industry, which have highlighted the impact of high mortgage rates and affordability constraints on the property market's recovery this year. The official measure, which includes cash buyers, lags behind indicators based on mortgage approvals as it tracks prices at the end of the house-buying process. Nationwide Building Society reported a 0.4% increase in UK house prices in May and a 0.2% rise in June.

While London rental inflation has eased slightly, tenants continue to face significant financial burdens due to high rents and a challenging Uk housing market. The mismatch between supply and demand in the rental sector remains a key issue, with affordability constraints and rising house prices adding to the pressure on renters.