The red-hot rental market in the UK is expected to cool in 2024 as rents have risen rapidly in recent years, reaching a point where tenants are facing affordability pressures.

Zoopla’s latest rental report indicates that the pace of growth could halve in 2024. Growth in rents slowed to 9.7% higher in December, down from 11.9% a year ago. Zoopla suggests that rents have risen so fast over the past three years that they are reaching a ceiling, leading to a potential slowdown in growth.

The report also notes a slight shift in the rental market dynamics, with increased stock becoming available, providing tenants with more choices and leading to a more measured approach.

Additionally, the UK property market is experiencing a shift in the balance of power from landlords to first-time buyers.

Higher rents and a shortage of supply in the rental sector have led first-time buyers to stretch themselves to get on the property ladder. The increase in rents over the last three years has made it more cost-effective for many first-time buyers to purchase rather than rent. First-time buyers have become the most resilient group in the property market, while buy-to-let investors have seen a decline.

Rapidly increasing buy-to-let mortgage rates, higher mortgage costs, limited tax relief, and stricter tax rules have contributed to landlords being pushed out of the market.

The Bank of England’s data shows that first-time buyers made up 25.8% of new mortgage loans by value between July and September, the highest proportion since records began in 2007. Meanwhile, landlords’ share of the mortgage market dropped to just 7.5%, the lowest level in 13 years. The trend is expected to continue, with first-time buyers having a competitive edge over buy-to-let investors.

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