Supply improves but remains tight as affordability pressures slow growth in high-rent areas
Rental growth in the UK has slowed to its lowest rate in over three years, according to Zoopla’s latest Quarterly Rental Market Report.
The annual growth rate fell to 3.9%, down from 9.1% a year ago, reflecting a narrowing imbalance between supply and demand and increasing affordability pressures.
The report also highlighted the significant financial challenges that renters are facing, with the annual cost of renting rising from £12,000 in 2021 to £15,240 in 2024 — an increase of £3,240, or 27%. This rate of growth has outpaced earnings, which rose by just 19% during the same period.
The slowdown in rental inflation has been observed across all regions and countries except Northern Ireland, where rents are increasing from a low base. The most substantial slowdown has occurred in London, where average rents rose by just 1.3% over the past year, compared to 8.7% a year earlier.
London remains the most expensive rental market, with average rents reaching £2,190 per month — 70% higher than the UK average. In contrast, Northern Ireland and the North East, which have the lowest average rents at £801 and £732 per month respectively, have seen the fastest growth, with increases of 10.5% and 8.7%.
In outer London, rents in more affordable boroughs such as Havering, and Barking and Dagenham rose by 5.9% and 5.2%, respectively, while inner London boroughs like Tower Hamlets, and Kensington and Chelsea saw minimal growth of less than 1%.
Outside London, rental growth has been driven by more affordable areas, including Rochdale (11.9%), Blackburn (10%), and Birkenhead (9%). Zoopla attributes this to renters seeking better value in smaller markets and outer city areas.
The supply of rental properties has improved slightly, with the number of homes available to rent up 12% compared to a year ago. However, availability remains below pre-pandemic levels in most regions, except the East Midlands.
In Nottingham, where rental supply has increased, rents have stalled at zero growth over the past year, compared to a 10.4% increase a year earlier. This shift reflects localised changes in supply and demand dynamics.
Zoopla does not anticipate a significant increase in the number of rental homes in 2025, citing a steady sell-off of properties by private landlords due to regulatory pressures and higher borrowing costs. Despite this, the platform suggests the peak of landlord exits may have passed, though conditions for renewed investment remain unfavourable.
Corporate investment in new build rental homes has provided some relief, but the pace of development has slowed due to the same financial and regulatory challenges facing private landlords.
Zoopla predicts average rents for new tenancies will rise by 4% in 2025, bringing the annual rental cost to £15,850. However, rental growth in London and larger cities is expected to lag due to affordability constraints and modest supply increases.
“Private renters moving home have faced rents rising faster than earnings over the last three years,” said Richard Donnell (pictured), executive director at Zoopla. “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. Rental growth has slowed but we expect an ongoing lack of rental supply to keep an upward pressure on rents.
“The ambitions to expand home building are important as 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.”
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