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UK rental cost growth has slowed from its record high, suggesting the crisis facing tenants has passed its peaked, official figures show.
Average private rents increased by 8.9 per cent in the 12 months to April, down from a peak of 9.2 per cent in the year to March, the Office for National Statistics said on Wednesday.
The data also indicated UK house prices are showing signs of recovery after a period of decline, with a rise of 1.8 per cent in the year to March. This marked an improvement on the 0.2 per cent fall in February and the first annual increase in prices since June. In March, the average house price stood at £283,000.
“After two years of unprecedented and generally accelerating annual growth, private rental price rises showed tentative signs of easing,” said Grant Fitzner, ONS chief economist.
“Most nations and English regions saw a slowdown, with a notable easing in London,” he added.
Rental price growth surged from about 1 per cent in 2021 to a record high in March 2024, reflecting rising borrowing costs that have made it difficult for many households to buy property and boosted rental demand.
The fast rise also reflected landlords passing on higher borrowing costs to tenants. However, mortgage rates have eased from the 2023 summer peak, helping the property market to recover.
Separate data published on Wednesday showed UK inflation fell less than forecast to 2.3 per cent in April, prompting markets to delay their expectations for when the Bank of England will start cutting interest rates from the 16-year high of 5.25 per cent.
Rents in London averaged more than £2,000 per month — an increase of £350 from April 2021 — far higher than in any other area, and more than three times the average rental cost of £666 in the North East.
London also registered the fastest rental rise in the country, at 10.8 per cent. However, the annual rate of growth was below the 11.2 per cent in March — the highest since the series began in 2006.
House prices in the capital fell 3.4 per cent in the year to March, making it the worst performer in the country and the only area to report a fall apart from the South East, where prices dropped 1.3 per cent.
London’s house prices continue to underperform the rest of the UK, reflecting a lack of affordable housing in the capital.
Rob Wood, economist at Pantheon Macroeconomics, said the “further market repricing of rate cuts will put a cap on the housing recovery”.
He added that following the inflation data, markets expected fewer than two quarter-point interest rate cuts by the end of 2024, compared with expectations of nearly three cuts at the end of March and six at the turn of the year.