The average cost of renting a newly let UK home is now £3,240 higher than at the end of the pandemic lockdowns, after three years of rental increases outstripping rises in earnings, research shows.
Rents have risen by 27% since 2021, the online property website Zoopla found, compared with a 19% increase in earnings, taking the annual cost of renting a property to £15,240, up from £12,000 in 2021.
Rental costs began to soar as Covid lockdowns were lifted in 2021, which resulted in average private rents hitting record highs.
The increase in housing costs was blamed largely on demand for rental properties greatly outstripping supply, which led to intense competition among tenants.
However, rents are now rising at their slowest level in more than three years, as tenants reach the limits of what they are able to afford to spend on housing.
Rental costs for newly let properties have climbed by 3.9% over the past year, which is the lowest rate of growth since August 2021.
In addition, rents have been rising more slowly in places with high rental costs, such as London, where they are increasing by 1.3% annually, down from 8.7% a year ago.
This is compared with much higher rental growth in areas with lower rental costs, such as Northern Ireland, where rents are rising by 10.5%, and in the north-east of England, where they are climbing by 8.7%.
Average rental costs in the UK are expected to rise by 4% in 2025, although they are not predicted to rise by as much in London and other large cities, and they will rise by a greater percentage in more affordable parts of the country.
The imbalance between rental property supply and demand, which has pushed rental costs higher in recent years, is beginning to narrow, Zoopla found.
Richard Donnell, the executive director at Zoopla, said: “The number of rented homes hasn’t grown since 2016, creating scarcity for renters at a time when demand has boomed on a strong labour market and the rising cost of home ownership.
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“Rental growth has slowed but we expect an ongoing lack of rental supply to keep an upward pressure on rents.”
Despite sizeable increases in rents in recent years, private landlords have continued to steadily sell off rental homes amid greater regulation and higher borrowing costs.
Zoopla believes that the peak of the sell-off by private landlords has now passed but is not clear when market conditions would appeal to landlords to begin to invest and increase rental supply.
Government ambitions to expand housebuilding would be the “quickest way to ease the pressure on renters” by boosting the supply of private and social rented homes, Donnell said. However, he added that private landlords should also be encouraged to remain in the market.