Rents are growing at their slowest level for more than three years, but a limited supply of new rental homes will help keep prices high, it has been revealed.

The average rent has increased 3% during the past year, down from 7.4% a year ago, according to Zoopla. It is the lowest growth for three and a half years.

The property website said the average rent in Britain now stands at £1,284 a month.

Zoopla said the slower pace of growth in rents can be attributed to a shift in supply and demand.

There are 11% more homes for rent, while demand is 17% lower.

It suggested this lower demand is due to lower levels of immigration and improved demand from first-time buyers.

Gap between demand and supply

However, it added that an ongoing gap between supply and excess demand will continue to push rents higher in more affordable markets.

Its data revealed that there are 12 renters currently chasing each home for rent.

It is almost half the level of competition for rented homes recorded between 2022 and 2024 - when rental demand was at its strongest - but is still double the levels seen before the pandemic.

Major policy changes for landlords

Zoopla went on to say that the major policy changes facing landlords is expected to limit new investment in private rented housing, and the number private rented homes in the next two to five years.

It said that the Renter’s Rights Bill will increase the complexity and cost of being a landlord in England, and is likely to limit levels of new investment, and growth in rental supply, as landlords assess the impact of the changes.

Another future risk to private rental supply comes from proposals for private rented homes to have an energy rating of ‘A’, ‘B’ or ‘C’ before they can be let out from 2028.

Richard Donnell, of Zoopla, said: “We expect demand for rented homes to continue to exceed available supply in 2025, keeping a steady upward pressure on rents.

“The overall stock of private rented homes is unlikely to increase in size in the coming years due to rental reforms and policy changes impacting levels of new investment.”

Angharad Trueman, of ARLA Propertymark, said: “The issue of demand far outstripping the number of homes available to rent is continuous.

“Landlords are battling ongoing increases in their overheads including rising taxes, mortgage rates and continuous challenges of ever-complex regulation, with many finding it difficult to break even on costs.

“The rental landscape continues to put pressure on current and future investors and, ultimately, without support for landlords to enter in the future or remain in the market, rent prices and stock levels are likely to continue to worsen.”

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