Weaker demand and growing affordability pressures have pushed rental growth to a four-year low.
Zoopla’s latest rental market report reveals that average rents for new lets increased by 2.8% in the 12 months to April, less than half the rate of rental growth a year ago (6.4%) and the lowest rate of growth since July 2021. The average monthly rent now stands at £1,287pcm, up £35 over the last year.
Growth has slowed across all regions and countries; in Scotland, it has slowed rapidly from 9.1% to 2.4% due to affordability pressures and the removal of rent controls.
Zoopla reports that rental demand is 16% lower over the last year but is still more than 60% above pre-pandemic levels, while lower migration is a key factor with a 50% decline in long-term net migration in 2024. Stability in mortgage rates and improved access to mortgage finance for first time-buyers, most of whom are renters, is another factor.
Despite weaker demand, renters still face a limited supply of homes for rent, which is 20% lower than pre-pandemic levels, despite being 17% higher than a year ago.
Lower levels of new investment by private and corporate landlords are also limiting growth. However, Zoopla predicts that UK rents remain on track to increase by 3-4% over the rest of the year.
Richard Donnell, executive director of research, says rents rising at their lowest level for four years will be welcome news for renters across the country. “The average annual cost of renting is over £2,500 a year higher than three years ago, the same as the increase in average mortgage repayments for homeowners,” he adds.
“The rental market desperately needs increased investment in rental supply across both the private and social housing sectors to boost choice and ease the cost-of-living pressures on the UK’s renters.”
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