For the first time in over three years, the growth in UK rents has slowed, with average increases for new lets standing at 3.9% over the past year. This marks a stark contrast to last year’s rental inflation of 9.1%, according to Zoopla’s latest Quarterly Rental Market Report. But what’s behind this slowdown, and what does it mean for landlords and renters alike?
A supply-demand tug-of-war
The slowing rental growth is partly due to a narrowing gap between supply and demand. Demand for rental properties fell by 29% over the past year, while supply crept up by a modest 12%. However, even with this improvement, the rental market remains tight. Richard Donnell, Executive Director at Zoopla, explained, “The number of rented homes hasn’t grown since 2016, creating scarcity for renters at a time when demand has boomed on a strong labour market and the rising cost of home ownership.”
This scarcity has driven average annual rents to a staggering £15,240—£3,240 more than three years ago. For many, this hike is tough to swallow. “It’s like trying to tread water while the tide keeps rising,” said one renter in London. “You think you’re managing, then suddenly the rent goes up again.”
Regional differences paint a complex picture
Across the UK, rental growth varies widely. London, with the country’s highest rents averaging £2,190 per month, has seen the most significant slowdown, with growth dipping to just 1.3% from 8.7% last year. Inner London boroughs like Tower Hamlets and Greenwich recorded increases of less than 1%.
In contrast, more affordable regions are experiencing sharper rises. Northern Ireland saw a 10.5% increase, while the North East wasn’t far behind at 8.7%. Smaller towns like Rochdale (11.9%) and Blackburn (10%) are emerging as hotspots, driven by renters seeking better value outside larger cities.
Interestingly, Nottingham bucked the trend entirely. It’s the only city where rents remained flat, thanks to a notable increase in rental supply. “Nottingham’s market is an outlier,” Donnell noted. “More homes mean more choice, and that helps keep rents in check.”
What does the future hold for landlords and tenants?
Looking ahead to 2025, Zoopla predicts rents will continue to rise by around 4%, bringing the average annual cost for new lets to £15,850. However, affordability pressures in high-rent areas like London are likely to dampen growth there, while more affordable regions will continue to see higher increases.
The big question is whether the supply of rental homes can catch up. Private landlords, facing increased regulation and higher borrowing costs, have steadily exited the market. “It feels like landlords are being squeezed out,” said one London property owner. “If the government doesn’t incentivise us to stay, there won’t be enough homes left to rent.”
Yet, there’s hope in corporate investment. New-build rental developments are helping fill some gaps, though progress is slow due to economic headwinds. Donnell remains cautiously optimistic: “The quickest way to ease the pressure on renters is to boost the supply of private and social rented homes. Private landlords will continue to play an important role and should be encouraged to remain in the market.”
