London rent rises could finally ease off next year, Zoopla has predicted.
Rents will still increase in 2024, forecast the property portal, but only by a further two per cent.
The capital has seen rent rises of nine per cent on average since October 2022, and 17.1 per cent the year before that as the rental crisis spiralled out of control.
It takes just 13 days for a property coming on the London market to be rented out to new tenants, said the property portal.
Zoopla said there are signs that high asking rents have overshot affordability levels.
"The UK is past peak rental growth, which will be welcome news to renters," said Richard O'Donnell, executive director of Zoopla.
"London will lead the slowdown, acting as a drag on the UK growth rate."
Rents have become unaffordable
Average rental prices in the capital are now at £2,125 a month, according to Zoopla.
The latest rent report from Hamptons estimated that Londoners spent a record-breaking £32.1 billion on rent this year.
Londoners have to allocate 40.2 per cent of their income to rent now, according to Zoopla's Rental Market Report, versus the UK average of 28.4 per cent.
Renting a room in London now costs over £1,000 a month in at least 43 London boroughs, according to Spareroom.
Zoopla said it had noticed that asking rents in London have started to be reduced by over five per cent, indicating that people simply cannot afford to rent at these prices.
"This is evidence that the strong upward momentum in rents over the last three years is meeting some resistance as renters face growing affordability pressures and earnings growth starts to moderate," said the report.
Scotland sees steepest rent rises
London didn't even see the highest rent rises in 2023.
Scotland saw the biggest increases, as rent went up 15.2 per cent in Edinburgh and 13.2 per cent in Glasgow.
This is despite Scottish rent controls that cap rental increases during a tenancy at three per cent annually, suggesting agents and landlords introduce big hikes between tenancies in an attempt to boost profits.
In England, Manchester, Cardiff, Newcastle, Nottingham, Southampton, Birmingham and Liverpool all saw steeper increases than London.
The average UK tenant is now paying £3,360 more a year on housing, and rents may rise another five per cent across the country in 2024.
Supply for rentals outstrips demand
Zoopla said that soaring rents are down to an imbalance of supply and demand in rental properties for the past three years.
This unprecedented increase in demand for rentals is down to four factors, said Zoopla.
When pandemic restrictions were lifted and people encouraged to return to working in offices, more people needed to rent in urban areas. This coincided with with more jobs coming on to the labour market as the economy re-opened.
As international travel re-opened, there was an influx in overseas university students entering the rental market, too. London student rentals now cost 150 per cent more than the maximum university maintenance loan.
And finally, the mortgage rate hike since interest rate hikes began has seen more people in the UK being forced to rent for longer as they can't afford to buy.
The Hamptons report suggested that many millennials may well be renting into retirement.
Falling demand for rentals in London
Zoopla noticed demand in London for rental properties has fallen 20 per cent year-on-year, although it's still higher than it was five years ago.
This could be a combination of UK economic growth faltering, while soaring rents and falling mortgage offers allow first-time buyers to scramble onto the property ladder.
Many London agents have reported that first-time buyers are becoming their biggest buying cohort.
Zoopla's forecast of a two per cent rent rise in London over 2024 is more conservative than Savills' most recent forecast, which estimated rents in the capital could increase by up to five per cent next year.
