Demand drops as supply of rental homes gradually increases
Rental growth in the UK has slowed to its lowest level in nearly three years, according to the latest market analysis from property website Zoopla.
The data shows a 39% drop in demand for rental homes over the past year, marking a shift in the market from ‘red hot’ to simply ‘hot.’
Over the 12 months to June 2024, rents for new lets increased by 5.7%, bringing the average UK rent to £1,232 per month. This represents a rise of £66 per month compared to the same period last year.
Several major UK cities experienced rent declines in the first half of 2024, including Nottingham (-0.6%), London (-0.4%), Brighton (-0.2%), and Glasgow (-0.2%). Zoopla’s rental index, which tracks rental growth across 64 cities, indicates that 75% of these cities saw slower rental growth.
While some areas are seeing rent adjustments after an overshoot, rents continue to rise at above-average rates in more affordable markets near large cities. For example, Rochdale (+6.9%), Doncaster (+5%), Southend (+5%), Sunderland (+4.4%), and Telford (+4.3%) all recorded significant rental growth in the first half of 2024.
A similar trend is observed across London, with inner boroughs like Tower Hamlets, Newham, and Greenwich seeing rent declines. More than one-third of London boroughs (12 out of 33) recorded falling rents in the first half of 2024, while outer London areas showed above-average rental growth.
Zoopla also noted that the supply of rental homes is gradually increasing, with estate agents reporting 17% more properties available compared to a year ago. However, the average letting agent still has one-third fewer homes to rent compared to pre-pandemic levels (2017-2019).
The modest improvement in supply is attributed to two factors: lower mortgage rates, which have made it easier for first-time buyers to purchase homes, and an increase in new homes being sold to corporate landlords.
However, some private landlords continue to sell their properties due to a changing business environment and higher mortgage rates, limiting the overall supply of rental homes.
“Renters will welcome the fact that rents for new lets are rising at their slowest pace for three years,” commented Richard Donnell (pictured), executive director at Zoopla. “Rents have risen so fast they have overshot in some cities, and we are seeing modest falls in rents in some cities as rents adjust to weaker demand and modest increases in the availability of homes for rent.
“Rents continue to rise more quickly in more affordable areas adjacent to large cities as renters seek better value for money. Rents are on track to be 3% to 4% higher over 2024 which is more than half the level recorded last year and below earnings growth providing some modest relief for the UK’s private renters.”
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