Shocking rent rises now a thing of the past says Zoopla

The scale of rent rises has peaked with future increases likely to be smaller, says Zoopla.

The portal’s latest report into the rental sector suggests rent on new lets was 9.7 per cent higher in October compared with a year earlier, averaging £1,201 a month.

The average cost of a new let had risen 31 per cent over the last three years, the Zoopla data shows as high demand has outstripped supply, especially with some private landlords selling up.

Now Zoopla predicts the slowdown will develop into a more "balanced" market in 2024.

Richard Donnell, executive director at Zoopla, says the strength of the jobs market, a rebound after Covid, immigration and high mortgage rates facing potential first-time buyers had combined to increase demand from tenants.

He says rents have risen too fast in some areas, with signs of some asking rents now being cut.

Donnell predicts that annual rental growth would slow to five by the end of next year - the slowest since September 2021.

"The supply-demand imbalance in rented housing is not going to disappear in 2024, however, the market is set to become more balanced than it has been over the last three years” he says, although there will be significant regional variations.

Much of the slowdown will be driven by London, where rents are higher than anywhere else. 

Scottish rents will rise however: growth in Edinburgh is already the highest across UK cities at 15.2 per cent a year in October, with Glasgow recording a 13.2 per cent increase.

North of England regional cities such as Manchester, Bolton, Derby and Newcastle are also seeing double-digit rental growth from strong demand and greater headroom for rents to increase relative to earnings.

Donnell concludes: “The slowdown in rental growth over 2024 will be down to a weaker labour market, slower earnings growth and growing affordability pressures limiting the pace at which rents can rise, particularly in southern England. 

“Rents have room to rise above the UK average in regional cities where affordability is less of a constraint, but this won’t be the case indefinitely.”