Rental supply falls for first time in three years, Zoopla reveals

Average rents have been pushed higher after rental supply dropped for the first time in three years in July, Zoopla data shows.

The portal says the main driver is scarcity rather than new regulations under the Renters’ Rights Act, with supply down 3% and also falling in Scotland where there are no new rules in force.

Zoopla’s latest Rental Market Report for July 2026 shows that the number of enquiries per rental listing is six per cent higher than a year ago. Enquiries have risen to 5.3 per listing, the highest level for almost two years as competition starts to increase once again.

The rental market is starting to tighten again after three years in which the supply of homes for rent has steadily improved and rental growth slowed.”

London and the Yorkshire and Humberside regions have seen the biggest increase in rental growth in the past year, with both areas recording an above average drop in the number of homes for rent, down 6% and 12% respectively.

By contrast, Wales has seen the sharpest slowdown in rental growth due to a 7% increase in the number of homes for rent.

The average rent currently stands at £1,340, according to the report, but there are regional growth variations, especially in cheaper areas.

Areas with average rents below £750 a month are seeing growth roughly double that of the national rate at 5.4% against 2.6% nationally, Zoopla said.

Some of the sharpest rent rises are in smaller, more affordable markets, with fewer landlords and less new investment, largely in Scotland and northern England.

Dumfries and Carlisle lead the postal areas with the fastest increase in rents this year, up 11.3% and 8.8% respectively.

Meanwhile, rental growth jumped in London to 2.9%, up from 1.7% a year ago.

Sensitive rental market

Richard Donnell, Executive Director at Zoopla, (pictured) says: “The rental market is starting to tighten again after three years in which the supply of homes for rent has steadily improved and rental growth slowed, easing the pressure on renters. Our latest report shows how sensitive the rental market is to even modest changes in how many homes are available for rent.

“Higher mortgage rates are not just impacting the sales market, they are keeping more would-be first-time buyers in rented homes for longer, reducing available supply just as the seasonal upturn in demand gets into full swing.  This is pushing rents higher again, mainly in regions where the availability of homes for rent has declined the most, although affordability remains an important constraint on how far rents can rise.

“The upward pressure on rents is greatest in London, where higher mortgage rates have had the biggest impact on home buyers, and in more affordable rental markets where renters have greater capacity to absorb increases.”

Donnell predicts that low levels of new investment by landlords and tenants renting for longer will mean rents increase by 4% to 5% by the end of the year.

He adds: “Growing the number of homes for rent through increased investment is the most sustainable route to boosting choice for renters and ensuring stability in rent levels over the long run.”

Industry reaction

Nathan Emerson, Chief Executive at Propertymark, says: “The latest Zoopla data reinforces the importance of increasing the supply of good-quality homes for rent. As availability falls, competition increases and affordability pressures grow for tenants.

“Higher mortgage costs are also keeping some would-be buyers renting for longer, while landlords continue to face significant borrowing, operating and regulatory costs that can make investment more challenging.

“A sustainable private rented sector requires the right conditions for responsible landlords to invest for the long term. Increasing supply must remain a priority if we are to give tenants greater choice, improve affordability and create a more stable rental market.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “We are not surprised to hear that the pace of rent increases is picking up again, as this confirms what we have seen in our offices over the past month or so.

“Some landlords are selling up when tenants decide to end fixed-term agreements as they are worried about the time it is likely to take to gain vacant possession under the Renters’ Rights Act. For many, this piece of legislation is the final straw on top of the ongoing tax and regulatory burden.

“Landlords are not being replaced fast enough – if at all – which would otherwise keep rents in check.

“Rental demand has been supported by aspiring first-time buyers in particular, who are staying put in rented accommodation for longer due to uncertainty in the sales market. This is resulting in an inevitable further upward pressure on rents.”