The number of homes available to rent in the UK has fallen for the first time in three years, according to Zoopla's latest Rental Market Report. This decline is putting renewed upward pressure on rents across the country.
Rental supply is now 3% lower than a year ago, with a more significant 6% drop in August compared to last year's level. Simultaneously, tenant demand is strengthening, with enquiries reaching 5.3 per rental listing, the highest in almost two years.
Zoopla attributes this trend to higher mortgage rates, which are keeping prospective first-time buyers in rented accommodation for longer. Additionally, subdued landlord investment is limiting the availability of new rental properties.
This squeeze has resulted in annual UK rental growth accelerating to 2.6% in July, up from 1.6% in February. The average monthly rent now stands at £1,340. Zoopla forecasts further acceleration, expecting annual rent rises of 4% to 5% by the end of 2026.
Regional variations show Yorkshire and the Humber experiencing a 12% fall in available rental homes, while London has seen a 6% decline. Conversely, rental supply in Wales increased by 7%, leading to the sharpest slowdown in rental growth there.
London's rental market is particularly tight, with supply falling and demand increasing. Annual rental growth in the capital has accelerated to 2.9%. Zoopla suggests that higher mortgage rates are significantly impacting prospective London buyers, who now need an estimated additional £35,500 deposit to offset increased rates this year.
Rent rises are also strongest in some of the UK's more affordable areas, where average rents are below £750 per month. These areas have recorded average growth of 5.4%, more than double the UK-wide rate.