Average UK rents for new lets are 3% higher over the last year, down from 7.4% a year ago, latest analysis from Zoopla reveals.
And the property portal says that the supply and demand imbalance is narrowing, with 11% more homes to rent compared to a year ago and demand 17% lower.
The Renters’ Reform Bill is also likely to limit new investment and the number of homes for rent, keeping an upward pressure on rents.
While rental market conditions are steadily improving after three years of chronic under supply and excess demand there is still an ongoing gap which is pushing rents higher in more affordable markets.
LOWER DEMAND
There are 11% more homes for rent while demand is 17% lower due to lower levels of immigration and improved demand from first-time buyers.
The average UK rent for a new let now stands at £1,284pcm, an increase of 3% compared to last year. This is the lowest rate of rental growth for three and a half years and is being driven by worsening rental affordability rather than a major increase in the supply of homes to rent.
The average letting agent has 13 homes for rent, up from a low of 10 in 2023 but still 22% below the pre-pandemic average. ONS’ household cost of living data also shows that living costs for private renters rose faster than any other group in 2024.
The mismatch between supply and demand remains a challenge with 12 renters currently chasing each home for rent.
This is almost half the level of competition for rented homes recorded between 2022 and 2024 (when rental demand was at its strongest), but is still double pre-pandemic levels.
The private rental market in England is facing some major policy changes, which are expected to limit new investment in private rented housing and the number of private rented homes in the next two to five years.
Levels of new investment in private rented supply have been lower since tax changes introduced in 2016.
Higher mortgage rates since 2022 have compounded the squeeze on new investment, meaning the number of private rented homes across Great Britain has been static at c5.5m since 2016.
Demand has grown faster than supply, which is why rents have risen by 24% over the last three years.
“The Renters’ Rights Bill will increase the complexity and cost of being a landlord in England.”
The Renters’ Rights Bill will increase the complexity and cost of being a landlord in England, and is likely to limit levels of new investment, and growth in rental supply, as landlords assess the impact of the changes, which are the biggest reforms in renting for 30 years.
Another future risk to private rental supply comes from proposals for private rented homes to have an energy rating of ‘A’, ‘B’ or ‘C’ before they can be let out from 2028. Almost half (45 per cent) of rented homes require investment to get from a D rating to a C rating.
While almost one in five (16%) of private rented homes are currently ‘E’, ‘F’ or ‘G’ rated and, as a result, are more at risk of being lost from the rental market, eroding available supply.
The demand for renting has cooled across all regions and countries of the UK over the last year, and supply is starting to increase across all areas except the West Midlands where rental supply remains lower than this time last year.
Rental inflation ranges from a low of 1.1% in London to 6.3% in the North East and 9% in Northern Ireland.
The growth in rents has slowed most rapidly in London, Scotland and the East Midlands over the last year, due to the number of homes available to rent increasing and affordability pressures.
Rents are falling by -1.2% in Nottingham, highlighting how localised changes in supply and demand can shape the trajectory of rents.
However, rents continue to rise more quickly in smaller cities where affordability is less of a constraint on rental growth, for example Blackburn (10.1%), Stoke (9.8%) and Rochdale (9.6%).
Source: Zoopla
WELCOME NEWS
Richard Donnell, Executive Director at Zoopla, says: “Rents are rising more slowly than average earnings, which will be welcome news for renters after three years where rents have risen rapidly.
“Affordability remains the primary constraint on rental inflation rather than increased supply and greater choice of homes for rent.
“We expect demand for rented homes to continue to exceed available supply in 2025, keeping a steady upward pressure on rents.
“The overall stock of private rented homes is unlikely to increase in size in the coming years due to rental reforms and policy changes impacting levels of new investment. It’s important that reforms in the private rented sector are designed and rolled out to minimise the negative impacts on available supply, which hit those with lower incomes hardest.
“We expect rents to increase by 3-4% per cent over 2025 as slower growth in large cities is offset by faster growth in more affordable markets.”
