Rental price boom is over, says Zoopla - but agents warn of more pain for tenants if landlords continue to sell up
The rental price boom is finally over, new figures from Zoopla suggest.
Average rents for new lets are 2.8 per cent higher over the past year, down from 6.4 per cent a year ago, according to the property portal - the lowest rate of rental inflation since July 2021.
The average monthly rent now stands at £1,287, up £35 over the past year.
It means the rental market is cooling after three years in which rents have increased five times faster than house prices.
Average rents for new tenancies are 21 per cent higher since 2022, compared to just 4 per cent for house prices.
The average monthly rent has increased by £219 over this time, broadly the same as the increase in average mortgage repayments.
Average annual rents have increased by £2,650 over the last three years, from £12,800 to £15,450.
Why are rent increases are slowing?
The slowdown in the rate of rental growth is a result of weaker rental demand and growing affordability pressures, rather than an increase in supply, according to Zoopla.
Rental demand is 16 per cent lower over the last year, although this remains more than 60 per cent above pre-pandemic levels.
Lower migration into the UK for work and study is a key factor, according to Zoopla with a 50 per cent decline in long-term net migration last year.
Stability in mortgage rates and improved access to mortgage finance for first-time-buyers, most of whom are renters, is also a factor behind the moderation in levels of rental demand.
Recent changes to how banks assess affordability will make it easier for renters on higher incomes to access home ownership, easing demand at the upper end of the rental market.
Alongside fewer renters looking to move, there is also 17 per cent more homes on the market compared to a year ago.
However, renters are still facing a limited supply of homes for rent which is 20 per cent lower than pre-pandemic levels.
Zoopla says lower levels of new investment by private and corporate landlords is limiting growth in the private rental market.
Looking to the remainder of 2025, rents remain on track to increase by between 3 and 4 per cent over the rest of the year, according to Zoopla.
'Rents rising at their lowest level for four years will be welcome news for renters across the country,' said Richard Donnell of Zoopla.
'While demand for rented homes has been cooling, it remains well above pre-pandemic levels sustaining continued competition for rented homes and a steady upward pressure on rents.
'The pressures are particularly acute for lower to middle incomes with little hope of buying a home and where moving home can trigger much higher rental costs.
'The rental market desperately needs increased investment in rental supply across both the private and social housing sectors to boost choice and ease the cost of living pressures on the UK's renters.'
What's happening across the country?
Rental growth has slowed across all regions of the UK over the last year, particularly in Yorkshire and the Humber, where rent costs dropping to 1.1 per cent, down from 6.4 per cent in 2024.
Zoopla says this is due to slower rental growth in key university cities, such as Sheffield, Bradford and Leeds, dragging the overall rate lower.
In the North East, rental growth has slowed to 5.2 per cent, down from 9.4 per cent in 2024.
In Scotland, the rate of growth has slowed rapidly from 9.1 per cent to 2.4 per cent due to affordability pressures and the removal of rent controls which limited how much rents can be increased within tenancies.
In Dundee, rents have actually fallen by 2.1 per cent. This time last year they were up 5.8 per cent.
In London, rents are posting modest falls in inner London areas including North West London and Western Central London, down 0.2 per cent and 0.6 per cent year-on-year respectively.
However, rents have continued to increase quickly in more affordable areas adjacent to large cities such as Wigan and Carlisle, both up 8.8 per cent and Chester, up 8.2 per cent.
Zoopla says the number of postal areas where rents have risen at over 8 per cent a year has fallen from 52 a year ago to just five today.
While rents are not surging as much as they were, many across the property industry feel the upward pressure on rents to continue, particularly if landlords continue to exit the sector.
'Rental value growth has cooled over the last year but upwards pressure remains thanks to tight supply,' said Tom Bill, head of UK residential research at Knight Frank.
'While some demand has transferred to the sales market as mortgage rates edge lower, a number of landlords have sold due to the tougher regulatory and tax landscape.
'As the Renters' Rights Bill comes into force over the next 12 months, the upwards pressure on rents could intensify if landlords see added risks around the repossession of their property and void periods.'
Greg Tsuman, managing director for lettings at Martyn Gerrard Estate Agents, added: 'Unfortunately, these figures do not represent an end of an era for the rental market but a temporary reprieve.
'There is immense pressure in the rental market right now. With the Renters' Rights Bill passing soon, landlords are continuing to exit the market to avoid becoming stuck.
'Thousands of tenants are receiving eviction notices and they are competing for a shrinking pool of housing, which can only see rental prices continue upwards.'
Best mortgage rates and how to find them
Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs.
That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord.
Quick mortgage finder links with This is Money's partner L&C
> Mortgage rates calculator
> Find the right mortgage for you
To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.
This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.
You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.
If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
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