Rental growth in the UK has dropped to 3.9%, its lowest level in more than three years and down from 9.1% a year ago.

Zoopla’s Quarterly Rental Market Report reveals a narrowing in the imbalance between supply and demand during 2024 and points to growing affordability pressures as a key factor behind slower growth in areas with high rents. It puts the average annual cost of renting at £15,240, an increase of £3,240 compared with 2021.

Rents in London are rising at just 1.3%, down from 8.7% a year ago, while rents are rising fastest in Northern Ireland (10.5%) and the North East (8.7%) - the two areas with the lowest average rents. Zoopla predicts that rents will increase by 4% next year, driven by faster rental growth in more affordable areas.

Greater regulation

While the number of homes available to rent is 12% higher than this time last year, Zoopla doesn’t expect a big increase next year, particularly as private landlords continue to sell off rented homes at a steady pace in the face of greater regulation and higher borrowing costs.

Despite this, Zoopla believes that the peak of the private landlord sell-off has passed and it’s now a question of when market conditions look right for landlords to increase investment and expand rental supply.

Richard Donnell (pictured) executive director at Zoopla, says: “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.”

“There’s still much work that needs to be done to ensure that the private rental sector can deliver stability for both landlords and tenants,” adds Angharad Trueman, ARLA Propertymark president. “This ideally should include revisiting tax structures and regulations that are deterring long term investment in the private rental market.”