- Rents have fallen in cities such as Brighton, Glasgow and London
The overheated rental market appears to be cooling after three years of rising prices, according to Zoopla.
The real estate website reports that rental growth has slowed to its lowest level in 33 months.
While average rents for newly leased properties are 5.7 percent higher than a year ago, rents rose by only 1.2 percent in the first six months of 2024.
Phase-out: rent increases were smaller in the first six months of 2024
The average rent for a house is now £1,232 per month, meaning prices have risen by £66 per month compared to the same period last year.
In a number of major cities, rents actually fell in the first half of this year, including Nottingham, London, Brighton and Glasgow.
In London, rents are falling in the inner city, particularly in Tower Hamlets, Newham and Greenwich.
Rents fell in over a third of London boroughs (12 out of 33) in the first half of 2024, significantly lower than a year ago.
In the suburbs of London, where rents are lower, there was above-average rental growth in the first half of the year.
Rents continue to rise above average in affordable markets adjacent to major cities where renting still offers better value for money.
Tenants in Rochdale saw their rents rise by 6.9 per cent in the first half of the year, while average rents in Doncaster and Southend also rose by 5 per cent.
What is causing the rental market to cool down?
Rents have risen in recent years because there are not enough available homes to meet demand.
According to Zoopla, the supply of rental properties via agents is slowly increasing, which could relieve some of the pressure on the market.
While agents have 17 percent more homes to rent than a year ago, the average letting agent still has a third fewer homes to rent compared to the pre-pandemic average, as recorded by Zoopla between 2017 and 2019.
According to Zoopla, the modest improvement in supply is due to two factors.
Lower mortgage rates have made it easier for first-time buyers to buy a home instead of renting. In addition, more new homes are being sold to corporate landlords to rent out.
A small but significant number of private landlords continue to sell rental properties despite higher mortgage rates and stricter restrictions. This has a negative impact on the total number of rental properties.
Richard Donnell, managing director of Zoopla, said: ‘Tenants will be pleased to hear that rents on new rental properties are rising at their slowest pace in three years.
‘Rents have risen so quickly in some cities that they have become too high. In some cities, we are seeing a slight decline in rents as rents adjust to the decline in demand and the slight increase in the number of rental properties.
‘Rents continue to rise faster in cheaper areas bordering major cities as renters seek better value for money.
‘Rents are expected to be 3-4 per cent higher in 2024, more than half last year’s level and below earnings growth, providing some relief for private renters in the UK.’
However, Tom Bill, head of UK housing research at property company Knight Frank, warns that if the government punishes landlords with tax changes and legislation, more homes will be sold, which could put further pressure on supply.
“Rental value growth is still high historically, after a number of landlords sold their properties in recent years due to increased bureaucracy and taxes,” said Bill.
‘Now that there are signs that supply is recovering and upward pressure on rents is easing, there is renewed uncertainty about further legislative changes by the new government.
‘If new rules are too strict for landlords, it could drive up rents because more homes are sold.’