Zoopla: Rental growth to halve to 5% in 2024

The pace of rental growth in the UK is set to halve in 2024 from its current level of 9.7%, Zoopla has forecast.

Asking rents are already too high in some markets, while there’s been a spike in rental listings with rent reductions of over 5%.

Richard Donnell, executive director at Zoopla, said:

“The slowdown in rental growth over 2024 will be down to a weaker labour market, slower earnings growth and growing affordability pressures limiting the pace at which rents can rise, particularly in southern England.

“Rents have room to rise above the UK average in regional cities where affordability is less of a constraint, but this won’t be the case indefinitely.”

London leads the slowdown

London has recorded the greatest slowdown in rental growth over the last year, down from 17% a year ago to 9%.

The capital saw rents fall by 10% during the pandemic, so it’s easy to see why rents rebounded so heavily.

Annual rental growth is lowest in the inner London boroughs of the City of London (6.3%), Westminster (7.3%) and Tower Hamlets (7.3%).

Donnell added:

“The UK is past peak rental growth which will be welcome news to renters who have seen rents rise by almost a third (31%) over the last three years.

“London will lead the slowdown, acting as a drag on the UK growth rate.

“The rental market has been stuck in a period of static supply and strong demand which has pushed rents higher.

“Demand has been driven by the strength of the labour market, the re-opening of the economy after the pandemic lockdowns, record immigration and higher mortgage rates making it harder for would-be first-time buyers to buy a home.

“Faster growth in earnings has supported a faster pace of rental growth.

“The supply-demand imbalance in rented housing is not going to disappear in 2024.

“However, the market is set to become more balanced than it has been over the last three years.”

Scotland still gaining momentum

Rental growth in Scotland continues to gain momentum and currently stands at 12.9%, up from 11.4% a year ago.

Demand has been strong in Scotland but rent controls are another factor behind the strong growth in rents for new lets. Landlords and agents are likely to be pushing rents higher to allow for the fact that rental increases will be capped at 3% a year throughout a tenancy.

At a city level, rental growth in Edinburgh is +15.2% and +13.2% in Glasgow.

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