Rents in affordable parts of the UK are rising at twice the national average, the latest indication from Zoopla shows.
While overall UK rent inflation fell to 2.1%, growth in areas where average rents are £750 a month or less rose by 5% year-on-year.
At the same time, demand for rental housing fell to a six-year low, and the average number of inquiries per rental listing fell to 5.6 in May, down from a peak of nearly 16 in 2022.
Zoopla found that in high-cost markets, rents are constrained by limits on what tenants can afford, but shortages in low-cost areas drive rents up.
The fastest rental growth was recorded in Carlisle, where occupancy increased by 9.1%, followed by Kilmarnock by 9% and Halifax by 6.5%.
In contrast, rents fell in many major markets, including Bournemouth, down 1.7%, Nottingham, down 1.5%, and Birmingham, down 1.1%.
Despite strong growth, rents in fast-growing markets remain below the national average.
The average rent in Carlisle, Kilmarnock and Halifax is around £700 per month, around 45-50% lower than the UK average.
Nationally, rent inflation eased to 2.1% from 2.6% last year.
Average wages are currently rising by 4% per year, meaning wage growth has outpaced rent inflation over the past 18 months.
However, supply remains lagging as across the UK regions and countries there are 20-30% fewer homes available to rent than before the pandemic.
London remains an exception to broader market trends.
The capital was the only region to record an increase in rental demand, with inquiries up 6% year-on-year.
Zoopla says higher mortgage rates are keeping first-time buyers in the rental market for longer, pushing London rental inflation to 2.2% from 1.9% last year.
The average rent in the capital now stands at £2,206 a month.
Zoopla expects rental inflation to remain between 2% and 3% until the end of 2026 but warns that gains in affordability could prove tenuous unless more rental properties come on the market.
Zoopla chief executive Richard Donnell says: “We are seeing a divide in how different regions and cities are responding to changes in the supply and demand for rental housing.
“Our latest report shows how quickly the rent gap is closing between affordable suburbs and big cities where rents are the highest.
“Rent inflation has fallen significantly in all major UK cities due to already stretched levels of affordability for tenants.
“While rental demand is at its lowest level in six years, the low level of new investment in rental properties means a continued shortage of rental housing is maintaining upward pressure on rents.
“It is commendable that income continues to grow faster than rent nationally, but the experience of tenants in local areas varies greatly and is a challenge for low-income tenants.
“Increasing the supply of rental housing is one of the most effective ways to improve affordability for private renters, especially those in traditionally affordable areas that have very little choice and are facing significant increases.”
Lettings Advice Service founder Julie Ford says: “The rental market is reaching a more sustainable rhythm, with inquiries for individual properties falling well below recent peak asking prices.
“This is not a sign of a decrease in demand, renters still need housing, but many are choosing to settle under the Renters’ Rights Act, reducing unrest rather than reducing demand.”
Propertymark chief executive Nathan Emerson says: “While it is good to see rent growth slowing nationally and wage growth beginning to outpace rent increases, these figures show that affordability pressures have not disappeared.
“In many areas where rents have been low, demand remains strong and limited housing supply is pushing prices up at a faster rate than the national average.
“The root issue is still the chronic shortage of rental property.
“Propertymark member data consistently shows that rental demand continues to outstrip available stock, and despite some easing in competition, there are still too few homes available to meet housing demand.
“This is particularly evident in low-cost areas where tenants tend to have fewer alternatives and less flexibility when rates rise.
“To improve affordability and give tenants greater choice, we need to see increased investment in the private rented sector, greater confidence among existing landlords to remain in the market, and a continued increase in the supply of homes available to rent.”
