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According to the latest data, buy-to-let tenants will pay more for their homes in the coming months, but Inflation-busting rent rises have peaked.
Property portal Zoopla has published a report that suggests year-on-year rent rises until October 2023 were 9.7 per cent, setting the average buy-to-let rent at £1,201 a month.
The firm expects a cooler, better-balanced market in 2024, with rents still increasing but much slower.
According to Zoopla, rents have soared by 31 per cent during the past three years. The result is tenants are paying some £64 a week (£3,360 a year) more rent to landlords than in 2020.
Analysts explained market forces have pushed up rents as demand for private rented homes has surged at the same time as more landlords have sold up and left the market.
Zoopla’s executive director, Richard Donnell, said the strength of the jobs market, a rebound after Covid, immigration and high mortgage rates facing potential first-time buyers combined to increase tenant demand.
To save money, renters are downsizing to smaller, cheaper homes, triggering bidding wars to secure a property.
Zoopla’s research cites data from the 2021 Census that shows a two-bedroomed home is the most popular property to rent, taking a 39 per cent slice of the market. One in five renters live in single-bedroom dwellings, and 29 per cent in three-bedroom properties. Larger homes account for a 10 per cent share of the market.
The firm expects rental growth to halve to around 5 per cent in 2024 - the slowest increase since September 2021.
The report also points out that rental demand is starting to drop. Researchers analysed inquiries per property in the summer and found demand peaked with 35 prospective renters chasing each home to let.
The result was rental demand slowed by 11 per cent year-on-year, although demand remains 32 per cent above the five-year average.
"The supply-demand imbalance in rented housing is not going to disappear in 2024. However, the market is set to become more balanced than it has been over the last three years," said Donnell.
Donnell also warned some rents have outstripped the market, with landlords offering reductions to fill empty homes.
“The slowdown in rental growth over 2024 will be kept in check by an ongoing scarcity of supply brought about by low new investment in the face of more regulation and higher mortgage rates,” added Donnell.
The report also listed the top 10 cities where rents have risen the most in the past 12 months:
Rank | City | % increase | Average rent |
1 | Edinburgh | 15.2% | £1,259 |
2 | Glasgow | 13.2% | £930 |
3 | Manchester | 12.2% | £1,037 |
4 | Cardiff | 11.8% | £1,065 |
5 | Newcastle | 11.7% | £798 |
6 | Nottingham | 11.3% | £932 |
7 | Southampton | 11.3% | £1,096 |
8 | Birmingham | 10.3% | £912 |
9 | Liverpool | 9.5% | £798 |
10 | Aberdeen | 9.0% | £673 |
Source: Zoopla