Key Rental Trends Include

  • Rental inflation slowing: The rate at which rents are increasing has decreased, particularly in London, where affordability constraints have led to a slowdown.
  • Shifting market dynamics: In the last quarter, some cities have experienced falling rents, indicating a potential shift in market conditions.
  • There is headroom for growth in affordable areas. Areas with more affordable rents may still see some growth as demand remains relatively high.
  • Political intervention needed: With the imbalance between supply and demand expected to persist, political parties are urged to put forward specific policies to address the challenges facing the rental sector.

The UK rental market is currently undergoing a period of adjustment. While the pace of rental growth is moderating, demand continues to outstrip supply. Despite a narrowing supply-demand imbalance, rental inflation persists due to sustained demand exceeding pre-pandemic levels, though affordability constraints are expected to moderate further rental increases in some areas.

UK Rental Inflation Cools

After peaking at 10% a year ago, annual rental inflation in the UK has moderated to 6.6% as of April 2024, the lowest rate in 30 months. This translates to an average monthly rent of £1,226, marking an £80 increase over the past year. London, in particular, has seen a significant slowdown, with rents growing by just 3.7% year-on-year and even falling 0.3% over the last three months.

This easing in rental inflation can be attributed to weakening demand, which is down 25% from last year, and affordability constraints impacting renters’ budgets. However, demand still remains double pre-pandemic levels, indicating continued upward pressure on rents, particularly in areas outside London where annual growth averages 8%.

The underlying rate of rental inflation, calculated as the annualised three-month growth, stands at 3%, the lowest for April since 2021. This further signals a potential deceleration in rental growth for the rest of 2024.

Rental Market Cooling in Select Cities

A notable shift is emerging in some UK cities, where rental prices have declined slightly over the last quarter. Cities experiencing this trend include Nottingham (-1.4%), Brighton (-1.1%), York (-0.4%), Glasgow (-0.4%), Cambridge (-0.3%), and even London (-0.3%). While these decreases are modest compared to the recent rapid rental growth, they signify a potential turning point in market dynamics, driven by localised supply and demand adjustments and heightened price sensitivity among renters.

Seasonal factors, such as the typically quieter Q1 period, also contribute to this trend. However, in cities with greater affordability headroom, rents continue to rise. Regional areas like Gloucester, Sunderland, and Northampton have seen increases of up to 3% in the last three months, highlighting the varied landscape of the UK rental market.


Affordability Concerns

A crucial factor influencing rental trends is the growing disconnect between rental growth and average earnings. Rents have been outpacing earnings for over 2.5 years, raising concerns about affordability. This disparity, coupled with persistent high demand and limited new housing investment, is creating a complex picture with varying regional impacts.

While stretched affordability may eventually curb rental inflation, the immediate outlook remains uncertain due to conflicting market forces. Areas with lower rent-to-income ratios, such as the North East and Scotland, are currently experiencing the fastest rental growth, while London, with its higher rents, is witnessing a slowdown. This divergence underscores the importance of closely monitoring regional trends and tailoring policies to address specific local challenges.

London’s Rental Market – A Tale of Two Cities

London’s rental market is experiencing a significant divergence in rental inflation, with inner and outer London boroughs showing contrasting trends. In inner London, where corporate demand and shared housing are prevalent, rental growth has slowed considerably. Areas like Westminster and Tower Hamlets have seen annual increases of less than 2.5%, with some even experiencing slight quarterly declines.

Conversely, outer London boroughs, such as Barking & Dagenham, Redbridge, and Havering, are seeing rents rise by over 10% annually. This disparity is primarily due to the affordability gap, as average rents in these areas are 20% below the London average, leaving more room for growth.

Supply Constraints and Future Outlook

The outlook for London’s rental market remains constrained by an enduring supply-demand imbalance. Despite a modest increase in rental properties, supply remains a third below pre-pandemic levels. With low investment in new rental housing and continued high demand, this imbalance is unlikely to improve significantly in the near future.

The slowdown in new investment by private landlords, driven by tax changes and rising interest rates, has further exacerbated the supply shortage. While corporate landlords have partially offset this decline, overall growth in the rental housing stock has stalled. The total number of privately rented homes in Great Britain has remained static at 5.4 million since 2016, highlighting the urgent need for policy interventions to address the structural issues facing the sector.


Sustained Demand and Limited Growth

The outlook for the UK rental market remains one of sustained demand but limited growth in the immediate future. Despite a steady flow of rental properties being sold, amounting to approximately 31,000 per quarter, the overall stock of rented homes is expected to remain essentially unchanged. This is due to the continued low investment by private landlords, offset only partially by the gradual increase in corporate landlord investment.

Demand for rental properties shows little sign of significant moderation in the near term. Key drivers, such as a strong labour market, high student housing demand, and challenges first-time buyers face, are expected to persist. Additionally, the lack of affordable housing options for those in acute housing needs continues to exert pressure on the rental market.

While the labour market has recently softened and first-time buyer activity has declined due to higher mortgage rates, these factors have been counterbalanced by increased immigration to fill job vacancies and a growing number of overseas students. As mortgage rates gradually decline in 2024, a recovery in first-time buyer activity is expected, but many potential buyers will likely remain in the rental market, awaiting further interest rate reductions.

Overall, while some moderation in rental demand is anticipated as pandemic-related factors subside, the fundamental drivers of demand and the ongoing shortage of affordable housing suggest that the rental sector will continue to experience sustained demand on multiple fronts.

UK Rental Market Outlook and Political Implications

The UK rental market is projected to experience a continued slowdown in rental inflation, with a forecast of 5% growth for 2024. This moderation is a natural consequence of the unsustainably high growth rates witnessed in recent years, driven primarily by shifts in demand rather than an expansion of supply.

The political landscape surrounding the private rented sector remains fluid. While the Rental Reform Bill did not pass into UK law, it is anticipated that rental reform will remain a vital issue in the next parliament, regardless of which party forms the government. Although enhancing renter protections is crucial, the paramount challenge lies in expanding the supply of rental homes, both private and affordable, through increased housing development.

Only by boosting supply can we enhance renters’ choices and empower them to exert greater influence over landlord decisions and the quality of rental homes. Despite the growing political focus on the challenges facing the private rented sector, actual progress hinges on political parties outlining specific plans and targets for the sector’s future in their manifestos. A thriving private rented sector is essential for fostering economic growth and achieving a more balanced housing market.


In conclusion, the UK rental market is navigating a transition period characterised by moderating rental inflation, shifting regional dynamics, and persistent supply-demand imbalances. While rental growth is expected to slow down in the coming months, demand remains robust, driven by factors such as a strong labour market and limited affordability of homeownership.

Policymakers, landlords, and tenants alike need to monitor these evolving trends closely and consider their implications. For landlords, adapting to changing market conditions and tenant preferences is essential. For tenants, understanding regional variations in rental inflation and affordability can aid in making informed decisions.

The need for comprehensive and targeted policy interventions to address the rental market’s structural challenges is more pressing than ever. Increasing the supply of rental housing, both private and affordable, remains a crucial priority to ensure a more balanced and accessible market for all.


Read the official Zoopla report below.

Official Report