Slower rental growth and improving affordability across much of the UK could provide some welcome breathing space for prospective first-time buyers although ongoing shortages in rental supply continue to underline the need for greater housing delivery.

According to Zoopla’s latest Rental Market Report, average rents across the UK are now rising at 2.1% annually, down from 2.6% in April.

Crucially, wage growth continues to outpace rental inflation, with average earnings increasing by around 4%, marking 18 consecutive months where incomes have risen faster than rents.

The figures suggest that affordability pressures in the rental sector may be beginning to ease, potentially allowing some tenants to accelerate deposit savings and improve their chances of entering the housing market.

AROUND THE REGIONS

Some of the UK’s traditionally more affordable rental markets are seeing the strongest rent increases.

Carlisle recorded annual rental growth of 9.1%, followed by Kilmarnock at 9% and Halifax at 6.5%, demonstrating that affordability challenges are increasingly shifting away from the country’s largest cities.

At the same time, competition for rental properties continues to cool. The average number of enquiries per rental listing has fallen to 5.6, down significantly from a peak of almost 16 enquiries per property in 2022 and the lowest level seen since 2020.

Despite weaker demand, supply remains constrained. Zoopla reports that every UK region continues to have between 20% and 30% fewer homes available to rent than before the pandemic, reflecting lower levels of private landlord investment and limiting the pace at which rents can stabilise.

London remains a notable exception. Rental demand in the capital has increased by 6% year-on-year, with higher mortgage rates continuing to keep many would-be first-time buyers in the rental market for longer. Average rents in London now stand at £2,206 per month.

BUILD MORE HOUSES

While improving rental affordability may help some tenants build deposits more quickly, persistent supply shortages continue to create challenges for renters and reinforce the need for increased housing delivery across both the private rented and owner-occupied sectors.

Richard Donnell (main picture, inset), executive director at Zoopla, said: “While demand for renting is at its lowest level for six years, low levels of new investment in private rented housing means an ongoing scarcity of homes for rent which is keeping an upward pressure on rents.”