Supply has turned

The number of homes available to rent started falling in May 2026, ending a three-year recovery in rental supply. Zoopla reports rents 2.6% higher in the twelve months to July, up from 1.6% in February, with the average rent now around £1,340 a month. New supply coming to the market has been running below last year's level for several months.

This is the first sustained fall in availability since 2023. The three-year recovery in supply was what held rent rises down through 2024 and 2025.

Why it is happening

Landlord sales have continued while new purchases have not replaced them at the same rate. The entry cost of a buy-to-let is part of that, with the additional-dwellings stamp duty surcharge at 5% and the nil-rate threshold back at £125,000. Compliance cost is the other part, with the EPC C requirement for 2030 now confirmed and the retrofit bill attached to it landing on older stock.

The result is a smaller pool of available homes meeting demand that has not fallen. Zoopla expects rental growth to reach as much as 5% by the end of the year.

What it means for property investors

  • Rent forecasts written in February are now too low. Anyone who underwrote a 2026 acquisition on 1.6% rental growth has headroom they had not counted on.
  • Regional tightness varies sharply. London and Yorkshire and the Humber have seen the largest rental growth over the year, and both recorded above-average falls in available homes, down 6% and 12% respectively.
  • Voids compress when availability falls. The practical gain is fewer empty weeks between tenancies, which often matters more to an annual return than the headline rent does.

What we are doing

We are not raising our rental growth assumptions. We underwrite new acquisitions on the rent achievable today, because a deal that needs next year's rent to work is a deal that does not work. Where this does change our behaviour is on hold periods: a tightening rental market strengthens the case for keeping good stock rather than trading it, and we are advising clients with maturing fixes to model both outcomes before deciding.

The bottom line

Falling supply into steady demand is the most reliable upward pressure on rent there is, and it has just reappeared after three years away. Treat the extra growth as a margin of safety on deals that already stack up. It is not a reason to buy one that does not.