But policy changes may limit supply in the coming years
The UK’s rental market is experiencing a shift, with supply gradually improving but remaining below pre-pandemic levels, according to Zoopla’s latest Quarterly Rental Market Report.
While rental demand has eased, affordability constraints continue to drive rent increases, particularly in more affordable regions.
Zoopla’s analysis indicates that rental supply has increased by 11% year-on-year, while demand has dropped by 17%, partly due to reduced immigration and a stronger first-time buyer market. Despite this, there are still 12 prospective renters competing for each available property — double the pre-pandemic average.
The average UK rent for a new tenancy has risen to £1,284 per month, marking a 3% increase from last year — the slowest annual growth rate in over three years. However, this slowdown is attributed to affordability pressures rather than a significant boost in rental supply.
Letting agents now have an average of 13 properties available, up from a low of 10 in 2023, yet stock remains 22% below pre-pandemic levels. Meanwhile, private renters continue to face rising living costs, with official data showing that their expenses increased faster than any other demographic in 2024.
Policy changes may constrain rental supply
The report warns that ongoing and proposed regulatory changes could discourage investment in the private rental sector, limiting the number of homes available for rent over the next two to five years.
Investment in rental properties has already been under pressure since tax changes in 2016 and further impacted by higher mortgage rates since 2022. As a result, the number of private rental homes across Great Britain has remained stagnant at approximately 5.5 million since 2016, despite growing demand — leading to a 24% rise in rents over the past three years.
The Renters Rights Bill, set to introduce significant changes to tenancy laws, could further deter landlords, with Zoopla warning that increased costs and regulatory complexity may reduce new rental property investment.
In addition, energy efficiency requirements pose another challenge. Proposed rules would mandate that rental homes meet an EPC rating of ‘A’, ‘B’, or ‘C’ by 2028. Currently, 45% of rental properties require upgrades to meet this standard, while 16% of homes rated ‘E’, ‘F’, or ‘G’ are at risk of exiting the rental market, further tightening supply.
Rent growth strongest in more affordable areas
Rental price growth has moderated across the UK, with London seeing the lowest increase at 1.1%, while Northern Ireland leads with a 9% rise. Regions such as the North East (6.3%) have also seen above-average rent hikes.
The slowdown is most noticeable in London, Scotland, and the East Midlands, where supply has improved, easing price pressures. In Nottingham, rents have even declined by 1.2%, reflecting localised supply-demand dynamics.
Smaller, more affordable cities continue to see rapid rental growth, with Blackburn (10.1%), Stoke (9.8%), and Rochdale (9.6%) recording the highest increases.
“Rents are rising more slowly than average earnings, which will be welcome news for renters after three years where rents have risen rapidly,” said Richard Donnell (pictured left), executive director at Zoopla. “Affordability remains the primary constraint on rental inflation rather than increased supply and greater choice of homes for rent.”
Donnell expects rental demand to continue outstripping supply in 2025, maintaining upward pressure on rents, and predicts a 3-4% rent increase over the year. He emphasised the need for carefully designed rental sector reforms to avoid exacerbating supply shortages, which would particularly impact lower-income renters.
Allison Thompson (pictured right), national lettings managing director at Leaders Romans Group, echoed Donnell’s concerns, adding that while affordability challenges are influencing demand, the bigger concern is the long-term impact of upcoming rental reforms.
“The Renters Rights Bill, set to be introduced this year, has the potential to reduce the supply of rental homes, as landlords reconsider their position in the market,” she said. “Without careful implementation, these changes could exacerbate existing shortages, ultimately putting further upward pressure on rents.
“Encouraging investment in the private rental sector is crucial to maintaining a balanced market and ensuring tenants have access to a stable supply of homes.”
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