Rental growth at lowest point since 2021 as North-South divide narrows

The latter is on a par with 9.7% rental growth in August last year, according to the Hamptons Monthly Lettings Index.

Meanwhile, the gap between North and South of England is at its smallest level since records began in 2013.

Hamptons continued that an average new tenancy in the South of England cost £1,318 per calendar month, which is 37% higher than the North of England.

This compares to a gap of 43% in August last year and a peak difference of 55% in November 2021 and rental growth in the North of England has been running at nearly twice that of the South over the past year.

In August the average rental cost in the South was £357 per calendar month more than one in the North, which is a decrease from £378 per calendar month last year.

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Tenants moving in the North East had the biggest rental growth increases at 12.1% year-on-year, the third consecutive month of double-digit increase.

London had smaller rental growth rises at 2.1% year-on-year, which compares to 17.1% recorded in August 2023.

North-South rental divide been closing over last five years

Indeed, the North-South divide has been narrowing over the past five years, Hamptons said as the average rents have risen by over a third, costing a tenant on average an extra £4,184 per year.

Rents in the North of England are up 48% over the period, compared to 34% growth in the South.

Hamptons said this “predominantly reflects the house price cycle, with prices in the North catching up with the South over the last seven years”.

The firm said adjusting for inflation, rents have risen by 10% since 2019, equal to around 2% a year.

The North of England’s rents have grown by 24% while in the South the rental growth is pegged at 10% and the North West’s rental growth was the highest at 53% since 2019, followed by North East at 51% and Scotland at 48%.

Wales had the lowest rental growth at 19%, followed by Greater London at 27% and South East at 30%.

Rental growth slowing but still in ‘positive territory’

Aneisha Beveridge, head of research at Hamptons, said the narrowing of the rental North-South divide “reflects the cyclical nature of the housing market with house prices in the North of England rising 31%, nearly double the Southern rate”.

“These figures have been mirrored in the rental market, with rents in the North of England quickly playing catch up,” she said.

However, Beveridge continued that it has only been in the last year that the “gap has really started to narrow beyond the point we’ve previously seen”.

“This has been driven by the slowing of rental growth across Southern England caused by greater affordability pressures. While tenants in the South have seen weaker growth in percentage terms, in cash terms, they’ve faced big rises. A 10% increase in South of England rents would cost tenants an extra £1,581 a year, £428 more than for a tenant in the North,” she added.

Beveridge said despite the pace of rental growth slowing, it’s “remained resolutely in positive territory, triggered by landlord’s higher costs”.

“Nearly half of the average monthly rent a landlord receives now goes towards costs. At the same time, investors are starting to think about the upcoming Budget. While recent Budgets have mostly left investors alone, landlords will be watching October’s announcement more closely than usual to get a steer on what they can expect from a Labour government,” she said.