The average rent for new lets in the UK is £1,245 as of July 2024 (published in September 2024).
Rents have risen 5.4% in the last year, the slowest rate of growth in 3 years.
Key figures
July 2024 | April 2024 | January 2024 | |
Average rent (new lets only) | £1,245 | £1,226 | £1,223 |
Annual rental growth | +5.4% | +6.6% | +7.8% |
UK rental inflation lowest for 3 years
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UK rent rises slow to lowest levels in three years
UK rents are now rising at half the rates seen in 2023. Rental inflation is currently at 5.4%, compared with 10.2% this time last year, taking it to its lowest level in 3 years.
Rent rises are slowing, but high levels of demand from renters, combined with a lack of rental properties available, mean rental inflation isn’t dropping as quickly as consumer prices and earnings.
The supply and demand imbalance is starting to narrow, but there's still a long way to go.
More affordable locations are continuing to see rents rise. However in larger cities, where renters are already reaching the limits of what they can afford to pay, inflation is decelerating.
But this, in turn, is having the effect of pushing up rents in neighbouring markets.
Potential tax changes undermine rental supply
A scarcity of supply has been an ongoing feature of the rental market for the last 3 years.
There are now 18% more rental homes available than this time last year, as lower mortgage rates enable some renters to exit the rental market to buy their first properties.
Yet despite this, there are still 24% less homes available than before the pandemic, which is limiting choice for renters.
There has been a steady flow of landlords selling for the last few years and the number of formerly rented homes for sale increased to 12.5% of all homes for sale in July.
Speculation over possible tax changes impacting landlords in the Budget could well result in an increase in landlord sales this autumn, but much depends on the timing of any potential tax changes.
Any economic or policy changes that lead to further erosion in the stock of rented homes will simply sustain rental growth in the near term.
And in the absence of more rental supply, growing affordability constraints will be the only factor slowing rent rises, a trend already impacting low-income renters who are having to make compromises.
Demand weakening off a very high base
Demand for renting has cooled over 2024 but remains high by pre-pandemic standards. The chart below shows the number of enquiries per rented home each month over the last five years.
The post-pandemic period saw demand for rented homes rising to record highs which, together with falling supply, pushed rents higher.
Rental demand started to rise quickly over the last half of 2021 as the economy re-opened. This accelerated over 2022 with the resumption of international travel, alongside changes in visa rules for workers and students at a time when the UK jobs market was also strong.
Two years ago, there were over 40 people chasing every home for rent.
Demand for renting was further compounded by the jump in mortgage rates over the latter half of 2022 and 2023, which made buying more expensive, keeping would-be buyers in the private rented sector and exacerbating demand.
Rental demand to remain above average
There has been a clear step down in rental demand over 2024 as ‘one-off’ pandemic factors fall away and lower mortgage rates enable some renters to buy, freeing up homes for rent.
Visa rules for students and workers have also been tightened and are likely to reduce levels of net migration, although the scale of change is unclear.
The competition for rented homes is still running at twice pre-pandemic levels and we expect demand to remain elevated into 2025 despite a softening labour market.
The unaffordability of homeownership will continue to support demand for renting, especially across southern England, where a sizeable proportion of workers are unable to buy.
A lack of a meaningful growth in the supply of affordable housing means the private rented sector will continue to see demand from those on lower incomes, adding to demand further.
Cities recording slower rental growth
London and other major cities across the UK have been leading the slowdown in rental inflation.
The UK’s largest cities have recorded some of the greatest gains in average rents, averaging over 10% per year for the last 3 years. This pace of rent rises is unsustainable and means affordability is now starting to impact rental growth.
Segmenting our rental index by area type shows the greatest slowdown has been in London, where rents are rising at just 2.5% - down from over 12% last year.
Rental growth is also slowing quickly across the UK’s other largest cities, the so-called ‘core cities’, with rents 5.8% higher over the last year - down from 10.7% a year ago.
Cities are major hubs of rental supply and together with London, these 12 core cities account for 30% of all private rented homes. The remaining 70% of rented homes are spread across other cities and towns of different sizes.
Rental inflation in non-city areas continues to run at an above-average rate of 6.8% - 7.4%-a-year. This reflects demand being pushed into more affordable areas, often adjacent to the larger cities which are key employment centres.
Where rents are rising fastest and slowest
Rental inflation remains in double digits across six postal areas, which are all adjacent to large cities, led by Kilmarnock (KA, 13%) to the south-west of Glasgow and Kirkcaldy (KY, 12%) in the east of Scotland.
Rent controls in Scotland have played a part in pushing rents higher.
In England, rents continue to rise quickly in Wolverhampton (WV, 12%), Oldham (OL, 11%), Darlington (DL, 10%) and Walsall (WS, 10%), which are all adjacent to large cities.
Rental inflation is less than 2.5% year-on-year in South West London, West London and East London. That’s largely because rents in these areas are already more than double the national average, so affordability is acting as a major constraint on rent rises.
New lets a leading measure of rental inflation
Our rental index tracks rents for new lets, measuring rental growth as homes become vacant and the rent is reset to the market level. This reflects the experience of renters seeking new homes. Rents for existing tenancies will rise more slowly.
The ONS rental index is not a ‘new lets index’ and tracks rental inflation across the whole private rental market i.e. covering rental inflation for existing tenancies as well as new lettings.
The chart below shows how the ONS index lags behind Zoopla’s new lets index. It takes time for rents set at the leading edge to feed across the rest of the market as tenancies end and/or landlords increase rents during tenancies.
The average length of a tenancy varies depending on different data sources and ranges between 30 and 40+ months.
Taking the average monthly growth in our new lets index over 33 months - and then expressing this on an annualised basis - delivers an annual growth rate that is very similar to the ONS index.
While the slowdown in rents for new lets is welcome news, many renters in existing tenancies are only starting to feel the impacts of higher rents over the last 3 years.
Will rents keep rising in 2024?
We expect rental inflation to slow to 3-4% by the end of 2024 as weakening demand and affordability pressures limit rental growth.
Weaker rental growth in cities will lead the slowdown, but there is a large rental market outside these cities where there is room for above-average growth. This explains the more drawn-out slowdown in rents.
Tax and policy change will continue to see some landlords exiting the market, keeping supply constrained, resulting in an upward pressure on rents into 2025.
The unaffordability of home ownership will continue to support strong demand for renting into 2025, and any policy changes that reduce supply will simply push rents higher - hitting low incomes renters hardest.
It’s vital that policy makers in Government focus on growing the stock of homes for rent.
Download the Zoopla Rental Market Report for September 2024
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Our Rental Market Index is a repeat transaction index, based on asking rents and adjusted to reflect achieved rents. The index is designed to accurately track the change in rental pricing for UK housing.