The annual growth in private residential rents has almost doubled to 2.6%, up from 1.4% a year ago, as demand increases in the face of a modest decline in rental supply, according to new findings reported by Zoopla.

Zoopla’s latest quarterly Rental Market Report, an analysis of trends in rents and rental affordability including a rental index powered by Hometrack, revealed that while rental growth picked up over 2019, it continues to run below the growth in average earnings.

The property expert found the growth in average earnings has outpaced the growth in rents for the last three years, and while this has improved the headline measure of rental affordability, the affordability of renting varies widely across UK cities.

The report revealed the average renter is currently spending 31.9% of their annual earnings on rent – unchanged from a year ago.

“A lack of supply and real wage growth is behind the increase in average rents across the country over 2019,” Zoopla research and insight director, Richard Donnell, commented.

“New investment by landlords has fallen since the introduction of tax changes in 2016 and this has been felt most keenly in southern England where property values are highest and yields lowest.

“This is creating scarcity and explains why rents are rising in the face of increased rental demand, as levels of employment continue to grow.”

Zoopla also announced that new investment in private rented housing had fallen since 2016 as private landlords responded to tax changes and lower yields in southern England.

Rental supply grew in the years running up to 2016, according to the report, and since then, Zoopla has recorded a 4% drop in the supply of homes coming to the market for rent. At the same time, the property expert has recorded an 8% increase in rental demand over 2019.

Zoopla suggested the combination of static supply and rising demand has resulted in upward pressure on rental values, which was picked up by the index during the last quarter.

Donnell continued: “The scope for landlords to increase rents is greater when earnings are rising faster than rents and this has been the case for the last three years. The positive news for renters is that the growth in rents is running below the growth in average earnings.

“We expect the acceleration in rental growth to moderate over the first half of 2019, which is typically a period of slower rental market activity. We expect rents to increase by 3.5% over 2020 as a lack of supply supports faster growth.

“With further policy changes expected from the Government to provide more security of tenure for renters we expect the supply of rented homes to remain constrained, which will support rental growth over 2020. With robust earnings growth, the impact on rental affordability will be muted.”

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