The UK rental market is experiencing a shift as the pace of rental growth and rent increases slows to its lowest level in three years. After a prolonged period of rapid growth, where tenants faced rising costs and limited affordability, the market appears to be stabilising.
While demand remains strong, Property118 reports that affordability constraints are beginning to influence rental trends, forcing landlords to reconsider pricing strategies.
According to a recent analysis from Zoopla, this slowdown reflects broader economic pressures and evolving tenant behaviours across the country.
Annual Rental Growth Slows to 6.6%
Zoopla’s analysis indicates that annual rental growth across the UK now stands at 6.6%, down from the 12% peak recorded in mid-2022.
This decline suggests a shift in the rental market, as higher costs have tempered demand and forced landlords to moderate price increases.
However, rents are still rising, with the average UK tenant now paying approximately £1,220 per month—a sharp increase compared to previous years. The rate of rental growth has slowed in 88% of local areas, marking a broad-based easing across the country.
Monthly rent increases averaged just 0.2% in January 2024, the lowest rise recorded in three years.
Regional Variations in Rental Growth
While rental price growth has slowed across the UK, some regions are experiencing greater declines than others. London, which has seen some of the steepest rent increases over the past few years, is now witnessing a cooling trend, with growth rates dipping to 5.1%.
The average monthly rent in the capital now stands at £2,119, placing significant pressure on tenants.Elsewhere, cities like Manchester, Birmingham, and Edinburgh continue to see relatively strong rental growth, albeit at a reduced pace.
In contrast, more affordable markets, such as Newcastle and Glasgow, are experiencing a more pronounced slowdown. Scotland has one of the highest annual rental growth rates at 9.7%, despite the wider national trend of moderation.
Affordability Pressures Shape the Market
One of the main drivers behind the deceleration in rental growth is affordability. Many renters are reaching their financial limits, forcing landlords to reconsider their pricing strategies.
Zoopla’s report highlights that renters are now spending, on average, 28% of their income on rent across the UK, with this figure rising to 35% in London, where housing costs remain particularly high.
This strain is particularly evident in major urban areas, where higher rents have led some tenants to seek smaller properties or relocate to less expensive locations.
The reduction in rental price growth suggests that landlords are responding to these pressures, as pushing rents higher risks increasing vacancy rates.
Future Outlook for the Rental Market
Despite the slowdown, Zoopla does not anticipate a significant drop in rental prices. Instead, the market is expected to stabilise as supply and demand become more balanced.
The UK’s chronic housing shortage continues to exert upward pressure on rents, and with interest rates remaining elevated, fewer first-time buyers are exiting the rental market.
Zoopla forecasts that rental growth could fall to around 5% by the end of 2024, marking a continued cooling from previous highs. This moderation could offer some relief to tenants who have faced sharp increases in recent years.
