Rental Market Cooling but Supply & Demand Imbalance Remains The latest Zoopla UK Rental Market Report reveals that annual rental inflation for new lets has slowed to 3.9%, marking the lowest growth rate in over three years. The average rent now stands at £1,270 per month, a sharp contrast to the 9.1% growth seen just a year ago.

Rental Demand Drops from Pandemic Highs While demand for rented homes is down 29% year-on-year, it remains 31% above pre-pandemic levels. The supply of rental homes is slowly recovering, with the average agent now holding 12% more rental properties than last year. However, stock levels are still 18% below pre-pandemic figures, ensuring continued pressure on rents.

Regional Variations – Where Rents Are Rising Fastest Rental growth is slowing across all regions except Northern Ireland, where rents are climbing at 10.5% annually.

• London has seen the greatest slowdown, with average rents up just 1.3% year-on-year, compared to 8.7% last year. However, affordability constraints mean rents in the capital remain high, averaging £2,190 per month.
• Northern regions are seeing stronger growth, with Rochdale (+11.9%), Blackburn (+10%), and Newcastle (+8.7%) among the highest risers as renters seek better value for money.

Affordability Limits Rent Growth in Expensive Areas The cost of renting has increased by £3,240 annually since 2021, far outpacing wage growth. As a result, rental inflation is slowing in high-cost cities where tenants have reached affordability limits. Instead, growth is shifting towards more affordable towns and suburban areas.

Stamp Duty & Mortgage Rates Shaping 2025 Trends With mortgage rates easing, more renters are considering homeownership, helping to stabilise rental demand. However, the looming Stamp Duty increase on March 31st, 2025 is prompting a rush among buyers to complete purchases before the deadline, which could impact rental demand in the coming months.

No Major Expansion in Rental Supply Expected Despite an increase in available rental properties, the supply of homes remains restricted. Private landlords continue to sell off rental properties, while corporate investment in new-build rental homes remains slow due to rising borrowing costs. A significant boost in rental supply is unlikely in 2025, keeping pressure on rental costs.

What This Means for Landlords

• Rental demand remains strong, but affordability limits how much rents can rise in high-cost areas.
• Smaller towns and suburban areas are seeing higher rental growth as tenants search for better value.
• Fewer homes are coming to the rental market, maintaining a landlord’s market in most areas.
• The Stamp Duty deadline could shift market dynamics, with some renters opting to buy sooner rather than later.

Final Thoughts The UK rental market is adjusting to new affordability pressures, but demand remains high. While rental growth is cooling, a lack of supply means rents will continue rising in many areas. Landlords should stay informed on regional trends and be strategic with their pricing to ensure steady occupancy in 2025.

Stay tuned for next month’s update!