Demand for rented homes has fallen to its lowest level since 2020, according to new Zoopla data, which shows that falling investment has led to fewer properties and higher rents.

Every UK region has 20-30% fewer homes to rent than before the pandemic. However, competition for properties continues to ease, with an average of 5.6 enquiries per rental listing in May, down from a peak of almost 16 in 2022. London is the only region bucking the trend - where potential first-time buyers needing hefty deposits have been hit by higher mortgage rates - with enquiries 6% higher year on year.

Zoopla reports that rental prices in traditionally affordable places are rising at double the average rate of rental inflation. In areas where average rents are £750pcm or less, rents are rising by 5% on average - more than twice the national average of 2.1%. The areas facing the highest increases in rents are Carlisle (9.1%), Kilmarnock (9%) and Halifax (6.5%).

Earnings

Meanwhile, average earnings are growing at 4%, marking 18 months that they have outpaced rental growth and reflecting a wider gradual improvement in the affordability of renting.

In most areas where rents are above £1,250pcm, the pace of growth is at or below the national average, as the high cost of renting limits how much further rents can rise.

Scotland recorded the strongest monthly rental growth of any UK region last month, with average rents rising from £1,167 in April to £1,257 (+7.7%), pushing the typical salary required to secure a home to £37,710, according to Propertymark. In London, average monthly costs increased from £2,259 to £2,307 (+2.1%), requiring a £69,210 salary.

Propertymark

Nathan Emerson, CEO of Propertymark, says there are still far too few homes available to meet housing need. “This is particularly evident in lower-cost locations where renters often have fewer alternatives and less flexibility when prices rise,” he adds.

“To improve affordability and provide greater choice for renters, we need to see increased investment in the private rented sector, greater confidence among existing landlords to remain in the market, and a sustained increase in the supply of homes available to rent.”

‍