Rental inflation continues its upward trajectory, registering double-digit percentages for the fifteenth consecutive month, driven by an enduring supply and demand imbalance, as per the latest UK Rental Market Report by Zoopla.

The report projects little respite even during the busy summer months, when demand typically surges by 40%. Over the past 21 months, rental prices have outpaced average earnings, posing significant challenges for tenants, particularly those with lower incomes.

Richard Donnell, Executive Director of Zoopla, acknowledges that rental costs have now reached their highest point in a decade, highlighting the strain experienced by renters in lower income brackets. He emphasizes the importance of enhancing rental supply as a key policy lever to support a healthier and more sustainable rental sector.

Rental affordability has reached a ten-year high, with average UK rents accounting for 28.3% of pre-tax earnings, slightly exceeding the ten-year average of 27%. The report identifies seven out of twelve UK regions facing the most severe affordability challenges. London stands out as having the highest rents, consuming 40% of gross earnings, although below the peak of 43% recorded in September 2015.

It predicts that the supply of rental homes is unlikely to improve in the second half of 2023 without increased investment from corporate and private landlords. Factors such as rising mortgage rates and a slowdown in the sales market could discourage landlord sales and encourage more property owners to opt for renting out unsold homes. However, high borrowing costs are currently impeding new investments.