The UK rental market is poised for a significant shift in 2024. After years of rapidly climbing rents, a new report from Zoopla forecasts a slowdown to just 5% growth this year. This change is largely attributed to evolving demand and affordability concerns, rather than an increase in housing supply, which remains a crucial issue for the future government to address.

Current Rental Market Trends

Despite the general slowdown, the competition for rental homes remains fierce, with 15 prospective tenants for every available property, an increase from the pre-pandemic average of six. While the overall supply of rental homes has increased by nearly 20% over the past year, it is still 33% lower than before the pandemic, indicating a persistent shortage driven by limited new investments in the rental sector.

Regional Variations Highlighted

The impact of these trends varies significantly across different cities:

• Nottingham, Brighton, York, Glasgow, Cambridge, and London have all seen rental prices drop slightly in the last quarter, suggesting that affordability issues are beginning to influence market dynamics.
• London exhibits a unique pattern with its inner and outer boroughs. Areas like Westminster and Tower Hamlets are experiencing the most significant slowdowns, with rents rising less than 2.5% over the past year. Conversely, outer boroughs like Barking & Dagenham, Redbridge, and Havering have seen increases over 10%, though their rents remain 20% below the London average.

The Affordability Crisis

Affordability continues to be a pressing concern, with tenants in different regions spending varying proportions of their earnings on rent—from 41% in London to just 21% in Scotland. This disparity explains why rental growth is fastest in areas where renting is comparatively more affordable, such as the North East and Scotland.

The Need for Policy Intervention

The stagnation in the number of homes available for rent, which has hovered around 5.4 million since 2016, underscores the urgent need for governmental action. The upcoming elections and the potential introduction of new policies could play a pivotal role in shaping the future of the rental market. Experts argue that increasing the supply of both private and affordable rental homes through enhanced housing delivery, additional funding, and planning reforms should be a priority for the new government. This approach would not only improve the selection available to renters but also enhance the overall quality of rental properties.

Zoopla’s Insights

According to Richard Donnell, Executive Director at Zoopla, while the rate at which rental costs are increasing has hit a 30-month low, they still outpace average earnings, though the gap has narrowed significantly. The continued high demand relative to supply is maintaining upward pressure on rents, but some areas are seeing stalled growth.