Zoopla Reports Rent Increase Peak, Forecasts Slowdown

Property website Zoopla indicates that the surge in rental costs has reached its peak, although rents are expected to keep rising into next year. Rent for new leases in October was on average 9.7% higher year-on-year, at £1,201 per month. Despite this significant hike, there's a noticeable cooling, with future slowdowns anticipated, leading to a more "balanced" market for tenants by 2024.

UK rents have soared - new leases are up by 31%, an annual increase of £3,360 over three years, driven by high demand and a shrinking supply due to landlords exiting the market.

Zoopla's Richard Donnell attributes the rental demand surge to a strong job market, post-Covid recovery, immigration, and high mortgage rates deterring first-time buyers. This has often led to downsizing and bidding wars, with four out of ten renters living in two-bedroom homes as per the 2021 census.

Although rent increases have outpaced sustainability in some regions, causing cuts in asking prices, Donnell forecasts an annual rental growth deceleration to 5% by late next year, which would be the lowest since September 2021.

Despite predictions of continued supply-demand imbalances in the rental market, a shift towards equilibrium is on the horizon, tempered by job market challenges and financial limitations.

The slowdown in rental growth is primarily expected in high-cost London, unlike Scotland, where rents continue to surge, particularly in Edinburgh and Glasgow.

The mortgage sector trade body has also projected a downturn in homebuyer lending and a rise in mortgage arrears among homeowners next year.