Rent inflation for those moving home within the private rental sector are beginning to ease as supply increases, although 12 renters are still chasing every property, it has been revealed.

Zoopla’s regular market snapshot reveals that rental inflation has dropped from 7.4% to 3%, although the portal also says rents in many areas have now hit their affordability ceiling, and that the annual cost of renting a property has risen £3,000 over the past 12 months to £15,400.

The portal has made an unusual foray into housing policy, warning that the “rental market still needs more supply – rental reforms combined with other proposed policy changes will limit new investment and supply growth”.

“Higher mortgage rates since 2022 have compounded the squeeze on new investment, meaning the number of private rented homes across Great Britain has been static at c5.5m since 2016.

“Demand has grown faster than supply, which is why rents have risen by 24 per cent over the last three years.”

Richard Donnell, the portal’s Executive Director says: “Rents are rising more slowly than average earnings, which will be welcome news for renters after three years where rents have risen rapidly. Affordability remains the primary constraint on rental inflation rather than increased supply and greater choice of homes for rent.

“We expect demand for rented homes to continue to exceed available supply in 2025, keeping a steady upward pressure on rents.

“The overall stock of private rented homes is unlikely to increase in size in the coming years due to rental reforms and policy changes impacting levels of new investment. It’s important that reforms in the private rented sector are designed and rolled out to minimise the negative impacts on available supply, which hit those with lower incomes hardest.

“We expect rents to increase by three to four per cent over 2025 as slower growth in large cities is offset by faster growth in more affordable markets.”

Industry reaction

Allison Thompson, National Lettings Managing Director, Leaders Romans Group

“The rental market remains under pressure, and while affordability challenges are influencing demand, the bigger concern is the long-term impact of upcoming rental reforms,” she says.

“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.

“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.”

Angharad Trueman, President of ARLA Propertymark

“The issue of demand far outstripping the number of homes available to rent is continuous,” she says.

“Month on month, Propertymark letting member agents report a lack of supply compared to the ever-growing number of people looking to rent a home, most recently stating that the average number of applicants per member branch is around 7 people for each available property.

“Landlords are battling ongoing increases in their overheads including rising taxes, mortgage rates and continuous challenges of ever-complex regulation, with many finding it difficult to break even on costs.

“The rental landscape continues to put pressure on current and future investors and, ultimately, without support for landlords to enter in the future or remain in the market, rent prices and stock levels are likely to continue to worsen.”

Read the report in full.