Landlord investment slump pushes rents higher – Zoopla

Weak landlord investment will see rents rise by between 4% and 5% by the year-end because the supply of rental homes has fallen for the first time in three years, Zoopla reveals.

It says that the number of available homes began dropping in May to reverse a supply recovery which had helped slow rent rises in 2024 and 2025.

The platform’s data shows there are now 3% fewer homes to rent than a year ago, while supply in August was 6% lower.

Zoopla says new investment by landlords remains muted because of higher costs and increased regulation.

Investment stays muted

Zoopla executive director, Richard Donnell, said: “Higher mortgage rates are not just impacting the sales market, they are keeping more would-be first-time buyers in rented homes for longer, reducing available supply just as the seasonal upturn in demand gets into full swing.

“This is pushing rents higher again, mainly in regions where the availability of homes for rent has declined the most, although affordability remains an important constraint on how far rents can rise.”

He added: “Low levels of new investment by landlords and renters renting for longer mean we expect UK rents to increase by 4–5% by the end of the year.

“Growing the number of homes for rent through increased investment is the most sustainable route to boosting choice for renters and ensuring stability in rent levels over the long run.”

Supply starts falling

Rents were 2.6% higher in the 12 months to July, up from annual growth of 1.6% in February, with the average now standing at £1,340 a month.

Zoopla says rent increases are typically strongest in places where the number of available homes has fallen most sharply.

Yorkshire and Humberside recorded a 12% fall in homes to rent, while supply in London was 6% lower.

Wales moved in the opposite direction, with the number of available homes increasing by 7% and the pace of rent growth slowing more sharply than elsewhere.

Scarcity lifts rents

The squeeze is noticeable in cheaper rent areas, where average costs below £750 a month have risen by 5.4%, more than twice the 2.6% national rate.

Some of the biggest increases have been recorded in smaller and cheaper markets with fewer landlords and lower levels of new investment.

For example, rents in Dumfries have risen 11.3%, while Carlisle recorded an 8.8% increase.

Zoopla says demand in many of these areas is weaker than a year ago, with falling availability rather than increasing competition between tenants responsible for the rise in rents.

Property sector reaction to falling landlord investment

Allison Thompson, LRG‘s chief lettings officer, said: “These latest figures reflect the strong level of tenant demand we are seeing, but the real interest lies behind the headline figures, specifically regarding the relationship between the sales and rental markets.

“Higher mortgage costs mean that some tenants are renting for longer than perhaps planned, while a previous dip in landlord investment is limiting replacement stock.

“Yet in London and the South East, falling property prices substantially improve yields.

“Not surprisingly, we are seeing established investors looking to expand.

“Clearly serious landlords recognise this unusual set of circumstances as a rare opportunity which they are keen to capitalise on.”

Tom Bill, the head of UK residential research at Knight Frank, said: “Rising mortgage rates are exacerbating the imbalance between low supply and high demand in the lettings market as more tenants stay put.

“That follows years of tightening supply as landlords left the sector due to a proliferation of red tape and taxes.

“For those who have stayed, the Renters’ Rights Act has aggravated the situation further, with some landlords setting asking rents higher to compensate for the increased risks they face around void periods, rent collection and regaining possession of their property.”

Nathan Emerson, Propertymark‘s chief executive, said: “The latest Zoopla data reinforces the importance of increasing the supply of good-quality homes for rent.

“As availability falls, competition increases and affordability pressures grow for tenants.

“Higher mortgage costs are also keeping some would-be buyers renting for longer, while landlords continue to face significant borrowing, operating and regulatory costs that can make investment more challenging.

“A sustainable private rented sector requires the right conditions for responsible landlords to invest for the long term.

“Increasing supply must remain a priority if we are to give tenants greater choice, improve affordability and create a more stable rental market.”