The rate of rental growth in the UK is at its lowest level in over three years – 3.9%, down from 9.1% a year ago. 

This is according to Zoopla.

The slowdown is down to a narrowing in the imbalance between supply and demand over 2024 and growing affordability pressures on renters in areas with high rents. 

The annual cost of rent has increased from £12,000 in 2021 to £15,240, an increase of £3,240 (27%) outpacing the growth in earnings (19%) over the same period.

Rental inflation has slowed across all regions and countries over the last 12 months apart from Northern Ireland, where they are rising off a low base. Rents continue to rise at an above-average pace in more affordable markets and are slowing the most in areas with the highest rents. 

London has recorded the greatest slowdown, with average rents 1.3% higher over the last year, down from highs of 8.7% a year ago. London also has the highest rents, averaging £2,190 per month which is 1.7x (70%) higher than the UK average.

Rents are rising fastest in Northern Ireland (10.5%) and the North East (8.7 per cent), the two areas with the lowest average rents of £801pcm and £732pcm respectively.  

Rents in Northern Ireland have underperformed the UK in recent years, and are growing off a low base.

With more renters than there are homes to rent, renters are seeking out the best value for money. This means the impetus for rental growth is being driven from markets with lower rental values and the lower end of the rental market in major cities. 

In London, rents are three to six per cent higher than last year in cheaper areas of outer London, led by Havering (5.9%) and Barking & Dagenham (5.2%). Rental growth is less than 1 per cent in inner London areas, led by Tower Hamlets (0.3%), Greenwich (0.5%) and Kensington & Chelsea (0.8%). 

Outside of London, rents are rising fastest in pockets outside major cities such as Rochdale (11.9%), Blackburn (10%), Birkenhead (9 per cent) Burnley (8.9%) and Newcastle (8.7%). This largely reflects ‘catch-up’ rental growth as renters seek out areas with better value for money in and around major cities.   

Changes in rents at the local level reflect local patterns of demand and supply. 

Rental growth has stalled in Nottingham, for example. It is the only city where the supply of homes available to rent has jumped over the last year, providing renters with more choice. Rents are unchanged over last year, down from 10.4% growth a year ago. 

Richard Donnell, Executive Director at Zoopla, says: “Private renters moving home have faced rents rising faster than earnings over the last three years. The number of rented homes hasn’t grown since 2016 creating scarcity for renters at a time when demand has boomed on a strong labour market and the rising cost of home ownership. 

“Rental growth has slowed but we expect an ongoing lack of rental supply to keep an upward pressure on rents. 

“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. Private landlords will continue to play an important role and should be encouraged to remain in the market.”