- UK rents for new tenancies rose 2.6 per cent in July, up from 1.6 per cent in February.
- Each rental listing is now receiving an average of more than five enquiries.
- Zoopla expects annual rent growth to reach 4 to 5 per cent by the end of the year.
The UK rental market is coming under renewed pressure after three years of easing, with fewer properties available and growing competition pushing rents higher.
Average rents for new tenancies rose 2.6 per cent in July compared with a year earlier, according to Zoopla. That was up from annual growth of 1.6 per cent in February and brought the average monthly rent to £1,340.
The latest increase remains below the general rate of inflation, but Zoopla expects rental growth to accelerate to between 4 and 5 per cent by the end of the year.
The change is being driven partly by a squeeze in supply. The number of homes available to rent has fallen 3 per cent compared with a year earlier, while each property listing is now attracting an average of more than five enquiries.
That is still well below the extraordinary queues seen in the rental market after the pandemic, but represents the most intense competition for rental homes in almost two years.
Richard Donnell, executive director at Zoopla, said the market was particularly sensitive to relatively small changes in the number of homes available.
“The rental market is starting to tighten again after three years in which the supply of homes for rent has steadily improved and rental growth slowed, easing the pressure on renters,” he said.
“Our latest report shows how sensitive the rental market is to even modest changes in how many homes are available for rent.”
The pressure is particularly pronounced in London, where higher mortgage rates have had a significant impact on people trying to move into home ownership.
Why higher mortgage rates are pushing rents up
The problem for renters is that the factors making it harder to buy a home are also keeping more people in the rental market.
Higher mortgage rates mean some aspiring first-time buyers are delaying their purchases and renting for longer. That reduces the number of properties available to new tenants just as demand begins its seasonal increase.
Donnell said: “Higher mortgage rates are not just impacting the sales market, they are keeping more would-be first-time buyers in rented homes for longer, reducing available supply just as the seasonal upturn in demand gets into full swing.”
The effect is not uniform across the country.
Zoopla said rent increases were being recorded across the UK, but affordability was limiting how far rents could rise in the most expensive areas. London is seeing particularly strong upward pressure, while renters in cheaper markets have more capacity to absorb increases.
“In less expensive areas, renters have more capacity to absorb rent rises before hitting an affordability ceiling, whereas in the most expensive areas, rents are already stretching what renters can pay, capping how much further rents can increase,” the report said.
Zoopla expects rents to rise by 4 to 5 per cent annually by the end of the year, roughly in line with average annual earnings growth.
But increasing supply could prove more difficult.
New investment in rental properties by landlords remains muted because of higher costs and increased regulation. That means there may be limited relief from additional homes entering the market in the near term.
Nathan Emerson, chief executive of Propertymark, which represents letting agents, said the figures highlighted the need for more high-quality rental properties.
“A sustainable private rented sector requires the right conditions for responsible landlords to invest for the long term,” he said.
“Increasing supply must remain a priority if we are to give tenants greater choice, improve affordability and create a more stable rental market.”
The pressure also comes after the Renters' Rights Act came into force in England at the start of May, marking what was described as the biggest shake-up of the private rented sector in more than 30 years.
For tenants, however, the immediate issue is less about the long-term structure of the rental market and more about finding a home they can afford.
With fewer properties available, more people competing for each listing and would-be buyers remaining in rented accommodation for longer, the easing renters experienced over the past three years is beginning to reverse.
And if Zoopla's forecast proves correct, the pressure on household budgets could become noticeably greater before the end of the year.
