Rents are growing at their lowest rate for three and a half years in a new blow for property investors.
Buy-to-let landlords have already been facing higher taxes and scaled back mortgage reliefs, as well as impending rental regulations - and now the profits from their property portfolio are at further risk.
Zoopla’s latest quarterly Rental Market Report found the average UK rent for a new let now stands at £1,284 per month annually.
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Average UK rents for new rentals are three per cent higher annually, Zoopla said, down from 7.4% a year ago
This is the lowest rate of rental growth for three and a half years, which Zoopla blamed on worsening rental affordability rather than a major increase in the supply of homes to rent.
It follows warnings last year that tenants will eventually reach a limit of how much rent they can afford to and will be willing to pay.
But the supply and demand imbalance remains, which is keeping rents high.
Zoopla’s analysis found there are 11% more homes for rent while demand is 17% lower due to lower levels of immigration and improved demand from first-time buyers.
This mismatch between supply and demand remains a challenge with 12 renters currently chasing each home for rent, Zoopla said.
That is at least almost half the level of competition for rented homes recorded between 2022 and 2024, but is still double pre-pandemic levels.
“Rents are rising more slowly than average earnings, which will be welcome news for renters after three years where rents have risen rapidly,” says Richard Donnell, executive director at Zoopla.
“Affordability remains the primary constraint on rental inflation rather than increased supply and greater choice of homes for rent.”
Where rents are rising and falling
Demand for renting has cooled across all regions and countries of the UK over the past year, Zoopla said, helped by lower mortgage rates helping first-time buyers onto the property ladder.
Supply is also starting to increase across all areas except the West Midlands where rental supply remains lower than this time last year, the property website said.
The report shows rental inflation ranges from a low of 1.1% in London to 6.3% in the North East and 9% in Northern Ireland.
Rents are rising by the most in the more affordable cities where affordability is less of a constraint on rental growth, Zoopla claims.
The data shows rents in Blackburn were up 10.1% annually over the previous quarter, by 9.8% in Stoke and by 9.6% in Rochdale.
City region | Rent inflation last 12 months | Current rent £pcm | Rent growth last 3 years | Rent growth last 5 years |
Blackburn | 10.1% | £735 | 30.8% | 48.2% |
Stoke | 9.8% | £797 | 30% | 43.3% |
Rochdale | 9.5% | £881 | 37.2% | 57.3% |
Belfast | 9.2% | £819 | 18.7% | 34.9% |
Birkenhead | 8.3% | £778 | 26.1% | 41.2% |
Burnley | 8% | £620 | 27% | 48% |
Wakefield | 7.9% | £787 | 25.3% | 43.4% |
Bolton | 7.9% | £869 | 33.9% | 54.6% |
Wigan | 7.7% | £798 | 32.8% | 54.1% |
Newport | 7.2% | £930 | 27.6% | 51.2% |
Grimsby | 6.8% | £655 | 20.2% | 33.1% |
Will rents rise in 2025?
Zoopla said it expects demand for rented homes to continue to exceed available supply in 2025, keeping a steady upward pressure on rents, especially amid fears that Renters’ Rights Bill and the end of section 21 ‘no-fault’ eviction notices will force landlords out of the sector.
Zoopla is expecting rents to increase by three to four per cent over 2025 as slower growth in large cities is offset by faster growth in more affordable markets.
Donnell added: “The overall stock of private rented homes is unlikely to increase in size in the coming years due to rental reforms and policy changes impacting levels of new investment. It’s important that reforms in the private rented sector are designed and rolled out to minimise the negative impacts on available supply, which hit those with lower incomes hardest.”
This is a pattern that lettings agents are also seeing.
Greg Tsuman, director of lettings at Martyn Gerrard Estate Agents, said: “These figures match what we’re seeing on the ground with rental demand shifting to more affordable areas as the sharp rental increases led to many renters hitting their price ceiling and moving elsewhere.
“That said, it is likely that we could see another surge in rents in the second half of this year due to a confluence of factors. Some landlords are taking possession of their properties in advance of section 21 evictions being abolished, a large number of buy-to-let properties are coming up for remortgage at higher rates and seasonal demand picks up around this time as well.
"These will all add upward pressure on rental prices, which, for landlords, means that the longer-term stability of buy-to-let investment remains intact.”
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