According to the latest data, rental growth has reached a peak and is expected to decelerate. Particularly in London, as the most expensive rental market in the UK, the slowdown in rental growth is expected to set the trend for the entire country.

Over the past three years, the imbalance in supply and demand has been a defining characteristic of the UK rental market. Newly rented properties have seen a one-third increase in rents, rising an average of £3,360 per year.

However, with deteriorating affordability, slowing demand, and slow supply improvements, we are now past the peak of rental growth. It is anticipated that by 2024, rental growth will significantly slow down, especially in the London market, with an expected growth rate of only 2%, the lowest since 2018.

The rental growth momentum continues to strengthen in the Scottish region, where rent controls may lead landlords and agents to raise rents, distorting the market. Various factors have driven rental demand well above average levels, but recent data indicates a steady decline in rental demand, which may signify a more balanced market.

Another notable trend is that rents in some markets have already become too high, showing resistance to further increases. With the slowdown in rental growth, a more balanced state in the rental market can be anticipated.

It's worth noting that despite a 11% year-on-year decline in rental demand, it remains 32% higher than the 5-year average. Demand in London has decreased by 20% year-on-year but still surpasses the 5-year average. This suggests that the supply-demand dynamics in the rental market won't disappear in 2024, but the market will become more balanced.

By 2024, rental growth is expected to continue outpacing profit growth in the regional housing market, with rents rising by 5-8%, primarily due to potential scarcity and room for rental affordability. However, London is expected to lead the slowdown in rental growth due to slowing job growth and affordability pressures.