After years of rising rental costs, tenants are finally seeing signs of relief. Annual rental inflation has fallen to 3.9 percent, the lowest level since August 2021, according to new data from property portal Zoopla.
Although rents are still rising, this represents a significant slowdown from the peak growth of 12 percent in 2022.
For the average renter, who now pays £1,270 a month for a typical rental property, slower price rises are welcome news. Over the past four years, rents have increased by 27 percent, while revenues have increased by only 19 percent. Compared to 2021, tenants pay an average of €3,240 more per year.
The pace of rental growth varies from country to country. Northern Ireland remains a hotspot, with annual rents rising by 10.5 percent, while rents in London have risen by just 1.2 percent in the past year. These regional differences highlight how location and local market conditions can impact affordability.
Richard Donnell, executive director of Zoopla, notes that the pandemic-era rent increase was driven by an imbalance between supply and demand. Although there are almost a third more potential tenants looking for housing than in 2019, the stock of available rental properties has been largely static since 2016. Although the deficit is expected to decline slightly, it is expected to persist. Potential buyers are being locked out of the housing market due to affordability issues, net migration is at record levels and more and more landlords are leaving the sector in response to stricter taxes and regulations.
Zoopla predicts that rents will rise by a further 4 percent by 2025, with demand for more affordable areas around major cities likely to be greatest. This is already evident in places like Havering, on the eastern edge of London, and Birkenhead, across the River Mersey from Liverpool, where rents are higher than in more expensive urban centres.
Labour’s pledge to build 1.5 million homes over the next five years could help ease the chronic shortage and keep rents and prices in check. However, Donnell warns that real relief from the pressure on tenants must come from encouraging all forms of housing supply, both private and social. Landlords, he says, will remain essential to meeting demand, and conditions may eventually encourage them to re-enter the market – but not yet.