Rent growth slows as the PRS cools – Zoopla

The UK’s private rented sector is cooling down with average rents climbing 2.4% compared to last year, Zoopla reveals.

Its latest Rental Market Report points out that this is the smallest annual rise in four years and a sharp drop from the rapid growth seen 12 months ago.

Monthly rents now average £1,300, up by £30 from a year earlier, but the cooling trend signals a market tilting in favour of renters, the platform says.

The main reason for this is a big boost in the number of homes available for rent, up by 19% over the past year.

PRS is returning to normal

Richard Donnell, executive director at Zoopla, said: “Rental market conditions are starting to normalise which will be very welcome news to renters.

“Lower migration and better mortgage availability for first time buyers are easing the scale of the competition for rented homes.

“There is also more choice for renters with more homes for rent as landlords start to buy homes once again and some owners who can’t find a buyer listing their homes for rent.”

He added: “The affordability of renting remains a key constraint on the pace of future rental inflation, and we expect rents to be three per cent higher by the end of the year at an average of £1,320 a month.”

Strong growth in rental stock

Zoopla says that letting agents now manage an average of 19 properties, compared to 14 in 2022.

The South West and East Midlands have seen strong growth in rental stock, with supply rising by 36% and 31% respectively.

This increase is partly due to homeowners who are struggling to sell their properties, opting to rent them out instead.

As a result, tenants now have more options and face less pressure to snap up the first available home, with properties lingering on the market for an average of 16 days.

Fewer tenant enquiries

Demand for rented homes has also softened, with letting agents reporting 24% fewer enquiries from prospective tenants compared to last year.

Stricter visa regulations have nearly halved migration levels in 2024, while more stable mortgage rates and rising incomes are enabling renters to move into homeownership.

A big policy change in early 2025, which relaxed mortgage affordability assessments, has boosted first-time buyers’ borrowing power by 20%.

That’s led to a 30% surge in first-time buyer mortgages, reducing competition for rentals and freeing up properties as these buyers vacate their rented homes.

Small rise in London homes

Despite the overall increase in rental supply, London presents a different picture with only a modest uptick in available homes.

The main issue is landlords facing higher barriers to entry and they now need an average deposit of £187,000 for buy to let properties compared to just £29,000 in the North East.

Also, 31% of homes for sale in London are listed by landlords looking to exit the market, keeping the rental market tighter than elsewhere in the UK.

The affordability crisis remains a pressing concern for many renters’ average rents rising by nearly £80 per week over the past five years.

That’s equivalent to an extra £4,100 annually.

Tenant affordability an issue

Zoopla warns that this rise has strained household finances, particularly those on below-average incomes, with almost a third relying on housing benefits that have failed to keep pace with rent increases.

However, affordability pressures are now curbing rent growth, with some cities like Bristol and Leeds seeing rents fall by 0.5% and 0.6% respectively.

Regionally, annual rent growth varies from under 2% in London, Scotland and Yorkshire and Humberside to 4.6% in the North East.

The property platform says the market is showing signs of stabilising after years of intense competition, when limited stock and high demand drove rents to unsustainable levels.

Looking ahead, Zoopla predicts rent growth will stabilise at around 3% for the rest of 2025, with tenant demand remaining above pre-pandemic levels.

Cooling rents not bad news

Nathan Emerson, the chief executive of Propertymark, said: “A cooling in rental prices isn’t necessarily as detrimental for landlords, given that mortgage products have improved, providing those with buy to let tracker mortgages an easing in financial pressure, which can mitigate the impact or reduce rent rises.

“The stabilisation of rental levels will equally be welcomed by many tenants who have been struggling against the rise in inflation over the past few years, which exceeded what people have been historically used to.

“Not only have the increases in the cost of living pushed rent prices up, but they have also, in part, been caused by an imbalance of supply and demand.”

Adam Jennings, the head of lettings at Chestertons, said: “London has always had a competitive rental market due to an ongoing supply and demand imbalance.

“This has only intensified over the past months as some landlords have decided to sell up, which has led to a decrease in the number of available rental homes in the capital.

“As the volume of tenant enquiries remains high, however, we are seeing multiple enquiries for a single property.

“This is resulting in London rents not seeing the price adjustment the market is witnessing on a national level.”

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