Zoopla: Rent Rises Slow but Still Increasing

According to property portal Zoopla's Q1 2025 report, buy-to-let rent rises are slowing after more than three years of increase resulting from chronic property undersupply and excess tenant demand.

While the market is improving, rent will continue to rise due to a mismatch between the supply and demand of rental property, which is unlikely to change anytime soon, according to the portal's latest rental market report.

The key to the future of buy-to-let is affordability, explains the report, as rents have soared by 24 per cent in the past three years and are finally rising slower than average earnings.

Zoopla's research shows that the average letting agent has 13 homes to rent for an average of £1,284 a month, and 156 renters are chasing them.

Where renters live also has an impact on the rent they pay.

Lack of homes to rent

Different cities have different rates of rent inflation, ranging from -1.2 percent in Nottingham to 6.2 percent in Newcastle-upon-Tyne and 10.1 percent in Blackburn.

"We expect demand for rented homes to continue to exceed supply this year, but to a lesser extent than we've seen in the recent past. The overall stock of rented homes is unlikely to increase in size in the coming years due to policy changes impacting profit margins and operating complexities for landlords," says the report.

"Lower levels of net migration have helped to moderate rental demand. This decline is expected to continue into 2025 due to stricter visa policies and increasing levels of emigration, particularly among international students.

"Affordability remains the primary constraint on rental inflation and is the primary factor behind rents rising at their lowest rate since August 2021. However, there remains scope for rents to rise at an above-average rate in areas where renting remains more affordable, including areas adjacent to big cities.

We expect rents to increase by 3-4% over 2025 as slower growth in large cities is offset by faster growth in more affordable markets. Minimising the negative impacts of policy change on supply is essential to help most renters on low to middle incomes.

New laws put off investors

Zoopla notes that rental demand has slowed while the number of homes available for rent has risen in all areas except the West Midlands, where supply has fallen by 10 percent in a year.

The report adds stricter regulations resulting from implementing the Renter's Rights Bill. These regulations will increase the complexity and cost of being a landlord in England and are likely to limit investment and growth in rental supply as landlords assess the impact of the changes.

Another investment risk is the proposal to allow private rented homes with an energy rating of 'A', 'B', or 'C' before they can be let from 2028. Some 45 percent of rented homes need thousands of pounds of investment to improve from a D rating to a C rating.

Read the full Zoopla quarterly rental market report (Q1 2025)