Average UK rents for new lets are 3% higher over the last year, down from 7.4% a year ago, Zoopla’s quarterly rental market report reveals.
The average UK rent for a new let now stands at £1,284pcm, which is the lowest rate of rental growth for three and a half years.
Zoopla suggests this is being driven by worsening rental affordability rather than a major increase in the supply of homes to rent as the average annual cost of renting has increased by £3,000 to £15,400 per year.
Meanwhile, the supply/demand imbalance is narrowing, with 11% more homes for rent while demand is 17% lower due to reduced levels of immigration and improved demand for first-time buyers.
There are still 12 renters currently chasing each home for rent, which is almost half (42%) the level of competition for rented homes recorded between 2022 and 2024, but is still double pre-pandemic levels.
Zoopla highlights that the rental market still needs more supply. However, rental reforms combined with other proposed policy changes will limit new investment in private rented housing and the number of private rented homes in the next two to five years.
The Renter’s Rights Bill is set to 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%) 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.
Zoopla executive director Richard Donnell 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% to 4% over 2025 as slower growth in large cities is offset by faster growth in more affordable markets.”
Propertymark ARLA president Angharad Trueman says: “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 7 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.”
