London’s Sky-High Home Rents Finally Growing Slower Than Wages

(Bloomberg) -- London’s home rental crisis showed early signs of easing after a surge in available properties led to the joint-smallest increase in advertised rents across Britain.

The online property portal Rightmove said rents in the capital rose 4% from a year ago in May. The average remained at eye-watering level of £2,652 ($3,355) a month.

It matched the slowest year-on-year growth among the UK regions with only Wales seeing a similarly small rise. It also was slower than the pace of wage increases, a sign that a brutal cost-of-living squeeze is easing. 

Rightmove also reported a let-up in the severe shortage of properties available to rent that sent costs for tenants spiraling in recent years. Rent especially in the capital has become a major concern, with high prices and a lack of places to live becoming a prime constraint for those seeking to work in London.

Rightmove said a 15% drop in tenants looking to move to London and a 16% rise in available properties helped to re-balance the market with the capital seeing the biggest improvement over the last year.

Rightmove’s figures show tentative signs that a painful squeeze on London tenants is loosening, with wages now climbing faster than rental costs. Rent increases peaked at 18% in 2022 after tenants rushed back to the capital following the pandemic only to find fewer new properties coming to market.

While growth in rents has cooled, young people in London are still put under financial strain from much higher monthly payments than anywhere else in the country. London rents are £1,758 higher a month than those in the region with the lowest costs.

While the picture in the capital has improved dramatically, Rightmove said that about 120,000 more rental properties are needed in the UK to bring down national price growth back to 2%. Rents outside of the UK still climbed 7% to a new record of £1,316 per month, rising fastest in the North East of England.

“It’s easy to forget that there was a time before the pandemic where rental price growth was more stable,” Tim Bannister, Rightmove’s property expert, said on the national picture. “Whilst there has been some improvement in the ratio between supply and demand, price growth at 7% suggest we are still out of balance.”

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