Although tenant demand has weakened, the number of people chasing each rental property was more than twice the level seen before the pandemic, according to the Zoopla Rental Market Report.
Zoopla attributed this to low levels of new investment in the private rental sector, and while the number of available properties has risen by nearly a fifth year-on-year, this is still 24% lower than the pre-pandemic average.
Its data suggested there was a “steady flow of landlords selling homes since 2016”. According to the Zoopla website, 12.5% of homes up for sale in July were previously rented. The firm put this down to possible tax and legislative changes, such as the proposed Renters’ Rights Bill.
According to the firm, this has also led to higher rents, as the rental growth for new lets stood at 5.4% in July, half the rate of growth recorded a year ago. The average rent came to £1,245 in July, £63 higher than the year before.
This has also led to a 30% rise in rental prices over the last three years, the report suggested.
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Zoopla said rental demand would stay above average levels for the rest of this year, and costs were set to be 3-4% higher by the end of 2024.
Rents rising most in affordable areas
The firm said the slowdown in rental growth was driven by low inflation in London, at 2.5%, and other major cities. In smaller cities and towns where rents are typically lower, prices were found to be rising the fastest, with some areas reporting growth of more than 10%.
In Scotland, Kilmarnock recorded rental growth of 13%, while Kirkaldy saw an increase of 12%. While this was the highest increase in rents, it was still 25-35% lower than average rental costs in Glasgow.
In England, an increase of 12% was recorded in Wolverhampton, while there was an 11% increase in Oldham and 10% rises across Darlington and Walsall separately. Zoopla noted that these areas were close to large cities with higher rents or had good transport links.
Richard Donnell, executive director at Zoopla, said: “The slowdown in rental inflation is being drawn out by a lack of homes for rent and continued strong demand, driven by the unaffordability of homeownership. Rental inflation is slowing in some major cities where rents are high, but they are still increasing quickly in more affordable areas.
“Any new policy or tax changes that result in a reduction in supply will simply push rents higher, hitting low-incomes renters hardest. It is essential policymakers focus on growing the stock of homes for rent as the primary route to slowing rental inflation and improving choice for renters. As things stand, the growing unaffordability of renting is the only route to slower increases in rents.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Squeezed supply sees 21 people competing for each rental property – Zoopla
