The private rented sector is ‘running hot’, according to Zoopla as demand continues to outpace supply.

The property portal found there are a third fewer homes available for rent than normal and demand per available rental home spiked last year by 250% above the five-year average.

It added that demand for rented homes remains 10% higher than this time last year.

As a result, rents are rising, up 11.1% annually on newly let properties, well above earnings growth, although Zoopla expects this to slow to 4-5% by the end of this year.

Rents have risen by a staggering 20% in three years – totalling an extra £2,220 a year.

What’s driving the rental market?

A strong labour market and record immigration drove demand for rented homes in 2022, said Zoopla.

Higher mortgage rates have weakened the economics of investing for landlords, impacting new investment in rental supply. And demand is expected to remain above supply this year.

Richard Donnell, executive director of Zoopla, said: “The demand for renting was incredibly strong in 2022 helping push rents up by 11%.

“Rents will continue to rise over 2023 but at a slower rate as demand moderates and affordability pressures start to bite harder on renters.”

David Votta, president of ARLA Propertymark added: “Zoopla’s latest report reiterates the huge disparity we’ve been highlighting concerns around for some time. The reported increase in demand when compared to the supply of homes paints a worrying picture.

“The UK Government must urgently intervene and realise the importance that landlords of private rented property play in housing the ever-growing population. Incentives must be provided for investment rather than continuous financial and regulatory hurdles which are preventing some from entering the market.”