Rental inflation across the UK has slowed to its lowest level in three and a half years, with average rents rising by just 3% over the past year, according to the latest UK rental market report from Zoopla.
The figure represents a significant drop from the 7.4% increase in average rents a year ago.
The slowdown in rental growth comes as the supply/demand balance shows signs of narrowing. The number of homes available to rent has increased by 11%, while rental demand has dropped by 17% compared to last year.
However, the market remains highly competitive, with 12 renters still chasing each available home. The average agent has 13 homes for rent, up from a low of 10 in 2023 but still 22% below the pre-pandemic average.
While a short-term increase in rental stock is helping to ease pressure, affordability remains a key constraint on rent growth. In fact, the report states that the slowing of rental inflation “has more to do with worsening affordability than an improvement in the supply of homes for rent”. Over the last three years, UK rents have risen by 24%, adding an average of £3,000 a year to tenants’ housing costs. The average annual rent now stands at £15,400.
Despite rising availability in the short term, the total number of rental properties has remained broadly static at around 5.5 million since 2016, largely due to tax changes, higher mortgage rates, and landlords exiting the market. Further policy shifts, including the upcoming Renters’ Rights Bill and proposed energy efficiency regulations could further discourage new investment.
“Rental inflation has slowed, which will be welcome news to renters, but there are still 12 people chasing every home for rent,” said Richard Donnell, Zoopla executive director. “Growing supply is essential to support those on lower incomes, and policy reforms for the rental market need to minimize the impact on supply.”
Regional variations in rental growth
London saw the lowest increase in rents at just 1.1%, while rents in Northern Ireland surged by 9%. Other notable changes include:
- North East: +6.3%
- Scotland: +5.8%
- East Midlands: +2.4%
At city level, rents are rising more slowly than average earnings (6% annual rise). Annual rental inflation ranges from -1.2% in Nottingham and 0.4% in Leeds to 6.2% in Newcastle, highlighting how localised changes in supply and demand can shape the trajectory of rental costs. Rising levels of rental supply in Nottingham is impacting rent levels, for example.
Outlook for 2025
Looking ahead, rents are forecast to increase by 3-4% over 2025, with affordability remaining the key factor in limiting further rises. While lower net migration and a modest increase in rental stock are helping to moderate demand, policy changes and landlord costs could further restrict supply.
Industry reaction:
Angharad Trueman, president of ARLA Propertymark, commented: “The issue of demand far outstripping the number of homes available to rent is continuous. Month on month, Propertymark letting member agents report a lack of supply compared to the ever-growing number of people looking to rent a home, most recently stating that the average number of applicants per member branch is around seven people for each available property.
“Landlords are battling ongoing increases in their overheads including rising taxes, mortgage rates and continuous challenges of ever-complex regulation, with many finding it difficult to break even on costs. The rental landscape continues to put pressure on current and future investors and, ultimately, without support for landlords to enter in the future or remain in the market, rent prices and stock levels are likely to continue to worsen.”
Tom Bill, head of UK residential research at Knight Frank, said: “Just as rising rents come under control after the rollercoaster ride of the last few years, the Renter’s Rights Bill threatens to inject more inflation into the system. By focusing a lot of energy and time on a small number of unscrupulous landlords, the government could inadvertently make life more difficult for tenants if supply falls and upwards pressure on rents grows.”
Read the orginal article: https://propertyindustryeye.com/rental-inflation-drops-to-3-5-year-low-zoopla-report-reveals/
