Renters are now paying £270 more per month compared to three years ago, according to the latest data from Zoopla. This sharp increase highlights the mounting challenges faced by tenants in the current rental market.
Zoopla’s figures reveal that the average annual cost of renting has surged to £15,240, marking a significant £3,240 rise since November 2021. This 27 per cent increase in rental costs has outpaced the 19 per cent growth in earnings during the same period, adding financial strain on many tenants.
Richard Donnell, executive director at Zoopla, noted the disparity between rental costs and earnings growth, stating, “Private renters moving home have faced rents rising faster than earnings over the last three years.” This imbalance underscores the pressure on renters in an increasingly competitive market.
The shortage of rental properties is a key driver of these rising costs. Donnell pointed out that the number of rented homes has not grown since 2016, leading to a scarcity of options for tenants. This shortage has been compounded by a strong labour market and the escalating costs of home ownership, which have further increased demand for rental properties.
Donnell also highlighted the importance of addressing the housing supply issue, stating, “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.” Increasing the availability of rental properties could provide much-needed relief for tenants grappling with high costs.
Private landlords remain integral to the rental market, despite the challenges they face. Donnell emphasised the need to support landlords, saying, “Private landlords will continue to play an important role and should be encouraged to remain in the market.” Their contribution is essential to maintaining the availability of rental properties for those unable to afford home ownership.
With the rental market under pressure, targeted measures to increase housing supply and support landlords could be pivotal in creating a more balanced and affordable environment for renters.
Are rents reaching a ceiling?
The sharp annual increases in rental costs seen over the past three years seem to be levelling off, with growth rates beginning to moderate. According to the latest data, average rents for new lets have risen by 3.9 per cent over the last year, the slowest rate of growth since August 2021 and a marked decrease from the 9.1 per cent recorded a year ago.
This slowdown can be partly attributed to a shift in the supply-demand dynamic within the rental market in 2024. Tenant demand has dropped by nearly a third compared to this time last year, while the number of available rental properties has increased by 12 per cent. These changes have eased some of the pressures driving rapid rent increases.
Affordability concerns are also playing a role, especially in areas where rents are already high. Tenants in such regions are finding it increasingly difficult to cope with rising costs, which is helping to prevent prices from climbing further.
London has experienced the most significant slowdown in rent growth. Over the past year, average rents in the capital have increased by just 1.3 per cent, a dramatic decline from the 8.7 per cent growth seen the previous year. Despite this, London remains the most expensive rental market in the UK, with average monthly rents of £2,190—70 per cent higher than the national average.
These trends suggest that while rental price pressures remain, particularly in high-demand areas, the market is showing signs of stabilisation as supply improves and affordability concerns temper further increases.
Adam Jennings, Head of Lettings at Chestertons, has noted a shift in London’s rental market, with prices reaching record highs and an increasing number of tenants transitioning from renting to homeownership.
In recent years, London’s rental prices have surged due to a growing pool of tenants unable to purchase homes amidst soaring property prices and elevated mortgage rates. However, Jennings highlighted that falling interest rates and impending stamp duty changes are now encouraging prospective buyers to make their first move onto the property ladder.
This trend is beginning to rebalance London’s rental market, creating more favourable conditions for those who remain in the sector. For renters, this shift could signal a much-needed easing of pressures in one of the country’s most competitive housing markets.
Where are rents still flying high?
In the more affordable regions of the UK, rents continue to experience significant increases. Northern Ireland has seen a 10.5% year-on-year rise, while rents in the North East of England have climbed by 8.7%. These areas still maintain the lowest average rents, at £801 per month in Northern Ireland and £732 per month in the North East.
Outside of London, rental growth has been most pronounced in areas outside major cities. For example, rents in Rochdale have surged by 11.9%, Blackburn has seen a 10% increase, and Birkenhead has recorded a 9% rise. This trend reflects a ‘catch-up’ effect, as renters gravitate towards regions offering better value for money near urban centres.
In some areas, the balance of supply and demand is influencing rental trends. Nottingham, for instance, is the only city where the supply of rental properties has increased over the past year, giving tenants more options. As a result, rents in Nottingham have remained steady, showing no growth over the last year after a significant 10.4% increase the year prior.
This dynamic highlights how localised factors play a crucial role in shaping rental markets across the UK.
What next for the rental market in 2025?
Although there are more rental homes available compared to a year ago, the number of properties for rent remains below pre-pandemic levels in most regions, with the East Midlands being the only exception.
Zoopla highlights that private landlords continue to sell off rental properties steadily. This trend persists despite significant rent increases, driven by greater regulation and rising borrowing costs. However, Zoopla believes that the peak of this sell-off has now passed.
The focus now shifts to when market conditions will encourage landlords to reinvest and expand the rental supply. This is likely to depend on lower base interest rates and improved rental yields, which are still some way off.
One positive development has been increased corporate investment in new-build rental homes. Even so, the pace of such developments has slowed due to higher borrowing costs and stricter regulations.
Zoopla predicts that the imbalance between supply and demand will persist. Average rents for new lets are expected to rise by 4% over 2025, bringing the annual rental cost to £15,850.
In London and other major cities, rental growth is projected to lag behind the UK average due to affordability challenges and a modest increase in rental supply.
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