Typical tenant pays £2,800 more per year than in 202...

Zoopla has given its latest market update on the private rental sector, with the headline rent rise now being 10.5 per cent annually - down from 12.2 per cent a year ago.

However, rental inflation has now been in double digits for 18 months and the typical tenant its paying £2,800 more than in 2020.

Scotland recorded the fastest growth in rents in the past 12 months at 12.7 per cent - and this despite rent controls - because the policy is forcing landlords to maximise rents for new lets.

Overall, Zoopla says the UK rented sector remains stuck in a period of low supply and high demand; rents continue to outpace earnings and rental affordability is now the worst for over a decade.

In detail, the property portal says demand for rented homes is slowing off a very high base but supply remains low, keeping an upward pressure on rents.

Demand for rented homes is 20 per cent lower than a year ago but still 51 per cent above the five-year average. And the number of homes for rent is 20 per cent higher than a year ago but remains 30 per cent below average for this time of year.

Average rents have increased by £110 per month over the last year – an annual increase of £1,320 - while over the last three years, rents for new lets are up by an average of £2,772 per year.

Rental demand is also boosted by higher mortgage rates, which have increased the cost of buying, keeping more would-be buyers in the rented sector. Mortgage repayments for a first-time buyer are more expensive than rental costs at 5.5 per cent mortgage rates. Zoopla says the greatest impact of this is being seen across southern England.

The net result of these trends is that the current supply/demand imbalance shows no sign of reversing as we move into 2024. Rental growth in the near term is set to be shaped more by the affordability of renting, and how renters adapt to higher rents, than major shifts in supply and/or demand.

The portal’s market snapshot says: “Increasingly unaffordable rental costs should temper demand and lead to a reduction in the rate of growth. However, the scale of the mismatch between supply and demand means that rental growth will reduce more slowly than might be expected.

“If supply remains low then a weaker labour market, lower immigration and falling mortgage rates would all be needed to reduce demand to a level that would reduce rental growth back towards 5.0 per cent per annum.”

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