UK rent rises accelerated in July as the supply of homes available to private tenants declined, increasing competition in parts of the country and raising concerns that rental costs could climb further before the end of the year.
Average rents for new tenancies increased by 2.6% compared with the same month last year, according to property website Zoopla. Although the increase remained below the general rate of inflation, Zoopla expects annual rent growth to reach between 4% and 5% by the end of 2026.
UK Rent Rises Gather Pace
Zoopla said the rental market was being affected by a shortage of available properties, while higher mortgage costs continued to discourage some potential first-time buyers from purchasing homes.
The combination has increased competition among people looking to rent, particularly in areas where the supply of properties is limited.
Richard Donnell, executive director at Zoopla, said the latest figures showed how rental prices could respond quickly to relatively small changes in housing supply.
“Our latest report shows how sensitive the rental market is to even modest changes in how many homes are available for rent,” Donnell said.
He added that increasing investment in rental housing would provide a more sustainable way to give tenants greater choice and help maintain more stable rents over time.
Fewer Rental Homes Available
The rise in UK rent rises follows a period when rental inflation had slowed significantly. Zoopla data showed annual rental growth fell to 1.6% in February, its lowest level during the recent slowdown.
However, the number of properties available to renters has since declined. There were 3% fewer homes available for rent than a year earlier, while each property listing received an average of more than five enquiries.
Although competition remains below the extreme levels seen in the aftermath of the Covid-19 pandemic, Zoopla said it had reached its highest level in almost two years.
London was among the areas where demand for rental properties was particularly strong.
Renters Face Different Pressures
Zoopla said rental conditions continued to vary across the UK, with affordability limiting how far rents could rise in the country’s most expensive areas.
In cheaper areas, tenants may have more capacity to absorb increases before reaching what the report described as an affordability ceiling. In higher-cost markets, however, rents are already close to the maximum many renters can afford.
Zoopla expects UK rent rises to accelerate to 4% or 5% annually by the end of the year. That would broadly match the average annual growth in workers’ earnings.
New Rental Rules Add to Market Changes
The Renters’ Rights Act came into force in England in May, marking one of the biggest changes to the private rental sector in more than three decades.
At the same time, investment in new rental homes by landlords remains limited because of higher costs and increased regulation, according to Zoopla.
Nathan Emerson, chief executive of Propertymark, said the latest figures highlighted the need for more high-quality homes in the private rented sector.
“A sustainable private rented sector requires the right conditions for responsible landlords to invest for the long term,” Emerson said.
He added that increasing housing supply should remain a priority to give tenants more choice, improve affordability and create greater stability in the rental market.
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