Zoopla says lettings growth will drop to 5 per cent in 2024, driven by a slowdown in London “as affordability pressures impact demand”
UK rents rose 9.7 per cent to £1,201 a month on average in October from a year ago, but Zoopla says lettings growth is past its peak and will drop by almost half next year.
The property platform says lettings growth will drop to 5 per cent in 2024, driven by a slowdown in London “as affordability pressures impact demand”.
In some areas prices have “overshot in some markets,” which is “evidence of growing resistance to higher rents,” according to the company’s latest UK Rental Market Report.
However, it says: The supply-demand imbalance in rented housing is not going to disappear next year but the market will become more into balanced.
Rental growth in October at 9.7 per cent is down from 11.9 per cent a year back, but ahead of earnings growth, presently at 7.9 per cent.
The survey says there has been “a chronic mismatch between supply and demand” in the rental market over the past three years, leading new lets to have increased by a third — or £3,360 a year on average — during this time.
Four factors have led rental demand over the past three years.
The re-opening of the economy after pandemic restrictions were lifted from mid-2021 onwards and the strength of the labour market, are two factors.
Higher mortgage rates have made access to homeownership more expensive, while record levels of immigration into the UK, especially high numbers of overseas students, have also bolstered demand.
But the survey says that these factors are “starting to plateau”.
It says the lettings market and the broader economy now experience fewer one-off pandemic impacts, while employment and income growth are slowing.
The study says that “high rents and falling mortgage rates are supporting first-time buyer numbers, which is easing rental demand”.
UK rental demand is presently 11 per cent lower than a year ago, but the report points out that the current levels of enquiries per property remains 32 per cent above the five-year average.
Demand in London is 20 per cent lower YoY but also remains above the five-year average.
The survey points out that the proportion of renters able to achieve asking rent reductions of more than 5 per cent is evidence that the market might be beginning to cool.
It says: The volume of asking rent reductions of more than 5 per cent is currently the highest in London, where 10 per cent of rental listings in November 2023 were impacted.
It adds: In the meantime, the proportion across the rest of the UK has also climbed to 7 per cent, the highest it has been for over five years.
