COMPETITION for rented homes has fallen to its lowest level in six years that will be a “welcome relief for renters” – but experts warn “rents are still rising”.
Rents for new lets increased by just 1.9% over the last year, according to Zoopla’s latest Rental Market Report.
Demand amongst renters has fallen by 14% over the last year while the number of homes available for rent has increased by 11% over the same period.
The result has been less competition between renters with 4.8 enquiries per property, down from 6.5 a year ago. This is clear evidence of the rental market becoming more balanced after a peak in competition for rented homes seen in 2022 and 2023, Zoopla says.
Rental growth remains stronger in the more affordable markets in Northern England and Scotland, with certain cities seeing increases of 3% to 4%, as demonstrated by Liverpool and Newcastle recording growth of 4.6% and 4.5% respectively.
In contrast, several cities across the Midlands and Southern regions are seeing lower or even negative price growth, with Bristol growing at 0.8%, Cambridge at just 0.1%, and the likes of Birmingham, down 0.7%, and Nottingham, down 0.8%, actually falling. In London, rents are growing at a relatively low 1.7%, with the average rent now sitting at £2,187.
The rental market is moving back towards balance
Richard Donnell, Executive Director at Zoopla, said: “The rental market is moving back towards balance as demand cools and more homes become available to rent. Renters are facing less competition for homes and slower rent increases than in recent years. Localised changes in demand and supply are resulting in rents falling in some cities but this will be only a short lived trend.
“The rental market is moving back towards balance as demand cools and more homes become available to rent. Renters are facing less competition for homes and slower rent increases than in recent years.
“However, supply remains well below pre-pandemic levels, which means increasing the number of rental homes remains key to improving affordability for the UK renters over the long term.”
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said renters will be relieved.
She added: “This is a welcome bit of relief for renters, but I do not think anyone should mistake it for a properly healed rental market. Yes, lower competition and slower rental growth are positive, especially after the intense pressure many tenants have faced over the last few years, but rents are still rising and they are rising from an already painful base.
“For many households, that will not feel like relief in any meaningful sense, it will just feel slightly less impossible. To me, this is more a sign that the market is becoming less overheated than genuinely affordable.
“A drop in demand and a modest rise in available homes may ease some of the panic, but they do not solve the deeper issue, which is still a chronic imbalance between supply, affordability and wage growth. So yes, it is a breather, and renters will take that, but overall it still feels more like a sticking plaster on a broken bone than a real fix.”
This is welcome relief for renters
Sarah Fox-Clinch, Director at Fox Davidson, said affordability of rents remains a challenge.
She continued: “A fall in rental demand alongside a modest increase in stock suggests the market is becoming more balanced. However, the overall level of rent remains a challenge for many households, as affordability is still stretched even if the pace of rental growth has slowed.
“For landlords and investors, higher mortgage costs have significantly altered the economics of holding rental property, which in turn limits how much rents can realistically soften. Higher mortgage rates are also slowing the number of renters able to move into homeownership, which will continue to underpin demand in the rental sector.
“At the same time, borrowing costs and tax pressures mean some smaller landlords are selling properties, which can restrict the amount of rental stock coming to market. As a result, the report does point to a degree of relief for renters. However, the UK still faces a structural shortage of rental housing, particularly in economically strong cities such as London and Bristol.”
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, said renters are still feeling the pain.
He added: “This is the rental market exhaling, not renters suddenly winning. Demand is down because affordability has hit a ceiling, not because supply is suddenly abundant. Fewer enquiries per listing should take some heat out of bidding wars and the fastest rent spikes, but it does not unwind the last two years of pain for existing tenants.
“The uneven bit matters. Zoopla’s report shows growth holding up in cheaper Northern and Scottish markets, which is exactly where households are most price sensitive and where in-migration can tighten things quickly. If policy makers read this as ‘problem solved’, they will miss the point: a balanced market still needs decent, stable supply, and renters need predictable costs.
“Relief is real if it shows up in fewer rent rises at renewal, not just slower growth on new lets. Watch the ONS private rental index next. If that stays sticky, this is a sticking plaster on a broken bone.”
