Demand among renters has fallen by 14% in the past year, while the number of properties available to rent has increased by 11% in the same period, Zoopla reveals.
Zoopla’s latest rental market report shows that the result is less competition between tenants, with 4.8 applications per property, compared to 6.5 a year ago.
The British property website says this is clear evidence that the rental market is becoming more balanced after a peak in competition for rental properties in 2022 and 2023.
It suggests that improving conditions in the first-time mortgage market and a continued decline in migration to Britain for work and study are the main drivers of lower demand for rental properties.
With three-quarters of FTBs coming from the rental market, more favorable conditions in the mortgage market have increased the number of FTBs, reducing demand for rental properties.
Zoopla notes that this has helped free up the number of rental properties, which explains the growth in supply.
However, the shift is not just coming from FTBs, with this increase also coming from potential sellers deciding to place their properties on the rental market.
The changing dynamics of supply and demand also means that it takes longer before homes are rented.
On average, finding a tenant now takes 20 days, which is a week longer than the peak of 13 days in 2022.
Meanwhile, the latest data shows that less competition for rental properties has slowed rent growth for new rentals to 1.9% last year, compared to 2.9% a year ago.
Average incomes have continued to rise faster than rents over the past 18 months, which also helps improve affordability for renters.
The annual rent for the average home outside London is now 33.5% of the gross annual income for a single person.
This is an improvement compared to 2023, when the ratio was the highest in twenty years at 35%.
Meanwhile, rental growth remains stronger in the more affordable markets of northern England and Scotland, with certain cities seeing increases of 3% to 4%, as evidenced by Liverpool and Newcastle recording growth of 4.6% and 4.5% respectively.
In contrast, several cities in the Midlands and Southern regions are showing lower or even negative price growth, with Bristol growing by 0.8%, Cambridge by just 0.1%, and cities such as Birmingham and Nottingham even falling by 0.7% and 0.8% respectively.
In London, rents are rising by 1.7%, with the average rent now standing at £2,187.
Zoopla Executive Director Richard Donnell says: “Market conditions for renters are the best they have been in six years. The rental market is returning to equilibrium as demand cools and more properties become available to rent.”
“Renters are facing less competition for housing and slower rent increases than in recent years. Local changes in supply and demand are resulting in a decline in rental prices in some cities, but this will only be a short-lived trend.”
“The rental market is returning to equilibrium as demand cools and more homes become available for rental. Tenants face less competition for homes and slower rent increases than in recent years.”
“However, supply remains well below pre-pandemic levels, meaning increasing the number of rental properties remains crucial to improving affordability for UK renters in the long term.”
Commenting, Nathan Emerson, CEO of Propertymark, said: “The rental market continues to present challenges that are closely aligned with both fundamental economic pressures and the emerging impact of updated legislation.”
“We are witnessing some of the biggest changes in over three decades, with the introduction of additional consumer protections, plus an updated tax framework for landlords.”
“We currently have a rental landscape in which housing demand continues to outpace available stock. Any reported increase in additional rental properties becoming available must closely align with the scenario of continued intense supply pressure.”
“In addition, looking at the latest data available, Propertymark members are reporting an increase of almost 7% in the number of landlords who have chosen to sell their properties year-on-year.”