UK rents lifted 9.7% to £1,201 a month on average in October from a year ago, but Zoopla says lettings growth is past its peak and will fall by almost half next year.  

The property platform says lettings growth will ease to 5% next year, led 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,” says the firm’s latest UK Rental Market Report.  

However, it adds: “The supply-demand imbalance in rented housing is not going to disappear in 2024 but the market will become more into balanced.”  

Rental growth in October at 9.7% is down from 11.9% a year ago, but ahead of earnings growth, currently at 7.9%.  

The survey says there has been “a chronic mismatch between supply and demand” in the rental market over the last three years, leading new lets to have risen by a third — or £3,360 a year on average — during this time.  

Four factors have driven rental demand over the last 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, particularly high numbers of overseas students, have also boosted demand.   

But the survey says that these factors are “starting to plateau”.  

It says the lettings market and the wider economy now experience fewer one-off pandemic impacts, while employment and income growth are slowing.  

The study adds that “high rents and falling mortgage rates are supporting first-time buyer numbers, which is easing rental demand”.  

UK rental demand is currently 11% lower than a year ago, but the report points out that the current levels of enquiries per property remains 32% above the five-year average.   

Demand in London is down 20% year-on-year but also remains above the five-year average.  

The survey points out that the proportion of renters able to achieve asking rent reductions of over 5% is evidence that the market might be beginning to cool.   

It says: “The volume of asking rent reductions of over 5% is currently the highest in London, where 10% of rental listings in November 2023 were impacted.   

“Meanwhile, the proportion across the rest of the UK has also jumped to 7%, the highest it has been for over five years.”  

The report points out: “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.   

“London will lead the slowdown in rental growth on slower employment growth and affordability pressures — the average London renter household of 1.25 people spends 40.2% of earnings on rent compared to a UK average of 28.4%.   

“We expect rental growth to continue to run ahead of earnings growth in regional housing markets over 2024 with rents rising by 5% to 8%, largely due to underlying scarcity and headroom in rental affordability for rents to rise further.”  

Zoopla executive director Richard Donnell adds: “The slowdown in rental growth over 2024 will be down to a weaker labour market, slower earnings growth and growing affordability pressures limiting the pace at which rents can rise, particularly in southern England.”  

“Rents have room to rise above the UK average in regional cities where affordability is less of a constraint, but this won’t be the case indefinitely.”