The growth of rent prices in the UK has slowed to its lowest rate since August 2021, with new lettings seeing an average increase of only 3.9% over the past year.

Image credit: iStock

According to a leading online property portal’s latest Quarterly Rental Market Report, published on 11th December, this slowdown is due to a closing supply-demand gap and increasing financial pressures on renters.

After years of constant rent hikes, could the market be stabilizing, or are renters reaching their financial limits?

In the last three years, renting costs have surged dramatically. The average annual rent has increased by £3,240, from £12,000 in 2021 to £15,240 in 2024, an astonishing 27% rise that far exceeds the 19% growth in earnings during the same period.

This affordability crisis is particularly severe in high-cost areas like London, where rents are now 70% above the national average. Although rent increases in the capital slowed to 1.3% this year—down significantly from 8.7% the previous year—the average monthly rent remains a staggering £2,190.

Richard Donnell of the online portal said: “Private renters moving home have faced rents rising faster than earnings over the last three years.

“The number of rented homes hasn’t grown since 2016, creating scarcity for renters at a time when demand has boomed on a strong labour market and the rising cost of home ownership.”

While London's rental market slows down, other regions are experiencing a different trend. Northern Ireland has recorded the fastest growth, with rents increasing by 10.5%, followed by the North East at 8.7%. These regions have traditionally had lower average rents—£801 and £732 per month, respectively which are unsurprisingly appealing to renters looking to save on housing costs.

Conversely, inner London boroughs like Tower Hamlets, Greenwich, and Kensington & Chelsea have experienced minimal rental growth, with increases of less than 1% this year. On the other hand, outer London areas such as Havering - 5.9% - and Barking & Dagenham - 5.2% - have seen more substantial growth as renters look for better value for their money.

Beyond London, rental hotspots have emerged in places like Rochdale -11.9%  -, Blackburn -10%  -, and Burnley -8.9% -, showcasing a move towards more affordable areas close to major cities. However, Nottingham stands out as an exception, with rents remaining steady this year due to an increase in available PRS properties.

Although rental supply has grown by 12% over the past year, the property portal anticipates that rents will climb by an average of 4% in 2025, raising annual rental costs to £15,850. The persistent shortage of rental properties is expected to maintain upward pressure on prices, especially in more affordable regions.

Meanwhile, landlords are grappling with increasing difficulties. The supply of private rented homes has stagnated since 2016, as many landlords are offloading properties due to stricter regulations and the ever-increasing borrowing costs.