Rental supply/demand imbalance

Rental supply/demand imbalance is set to remain over 2025

Rental market conditions are improving, but the supply/demand imbalance is set to remain over 2025 says Zoopla’s latest rental index. Affordability will limit rental inflation in areas with high rents, but there is room for rents to rise faster than earnings in more affordable areas over 2025.

UK rents have increased by 3.9% in the 12 months to October 2024, down from 9.1% a year ago and averaging at £1,270 per month. This is the lowest growth rate for over 3 years (August 2021) and the first time that earnings are rising faster than rents since September 2021. Rental growth is slowing as the imbalance between rental supply and demand narrows, with the supply of homes for rent slowly recovering. On average, there are 12% more homes for rent than last year, but this is still a fifth (18%) lower than pre-pandemic levels. Demand for rented homes is 29% lower than last year as one-off pandemic factors fade and migration for work and study slows. However, enquiries for rented homes remain nearly a third (31%) higher than pre-pandemic levels.

Zoopla expects the mismatch between supply and demand to continue over 2025, keeping a steady upward pressure on the cost of renting. However, growing affordability constraints in areas with high rental costs will help to moderate the pace of rental inflation over 2025.

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