Rental supply drops after three-year recovery, Zoopla finds

Rental growth in these areas stood at between 3% and 4%.

Areas with average rents below £750 a month recorded growth of 5.4%, compared with 2.6% nationally.

Dumfries recorded annual rental growth of 11.3%, while rents in Carlisle rose by 8.8%.

Richard Donnell, executive director at Zoopla, said: “The rental market is starting to tighten again after three years in which the supply of homes for rent has steadily improved and rental growth slowed easing the pressure on renters. 

“Our latest report shows how sensitive the rental market is to even modest changes in how many homes are available for rent.

“Higher mortgage rates are not just impacting the sales market, they are keeping more would-be first-time buyers in rented homes for longer, reducing available supply just as the seasonal upturn in demand gets into full swing.”

Donnell added: “This is pushing rents higher again, mainly in regions where the availability of homes for rent has declined the most, although affordability remains an important constraint on how far rents can rise.

“The upward pressure on rents is greatest in London, where higher mortgage rates have had the biggest impact on home buyers, and in more affordable rental markets where renters have greater capacity to absorb increases. 

“Low levels of new investment by landlords and renters renting for longer mean we expect UK rents to increase by 4–5 per cent by the end of the year.”

She said: “Growing the number of homes for rent through increased investment is the most sustainable route to boosting choice for renters and ensuring stability in rent levels over the long run.”

Reaction:

Allison Thompson, chief lettings officer at LRG: 

“These latest figures reflect the strong level of tenant demand we are seeing, but the real interest lies behind the headline figures, specifically regarding the relationship between the sales and rental markets. 

“Higher mortgage costs mean that some tenants are renting for longer than perhaps planned, while a previous dip in landlord investment is limiting replacement stock.

“Yet in London and the South East, falling property prices substantially improve yields. 

“Not surprisingly, we are seeing established investors looking to expand. 

“Clearly serious landlords recognise this unusual set of circumstances as a rare opportunity which they are keen to capitalise on.”

Nathan Emerson, chief executive officer at Propertymark: 

“The latest Zoopla data reinforces the importance of increasing the supply of good-quality homes for rent. 

“As availability falls, competition increases and affordability pressures grow for tenants.

“Higher mortgage costs are also keeping some would-be buyers renting for longer, while landlords continue to face significant borrowing, operating and regulatory costs that can make investment more challenging.

“A sustainable private rented sector requires the right conditions for responsible landlords to invest for the long term. 

“Increasing supply must remain a priority if we are to give tenants greater choice, improve affordability and create a more stable rental market.”