Overview  

Rental prices are projected to continue their upward trend, but at a more moderate rate than in previous years. Specifically, rents for ‘new lets’ are expected to rise by 4% in 2025, largely influenced by more affordable areas that have room for further growth. In contrast, London and other major cities are likely to experience slower increases due to mounting affordability challenges (Hometrack).

In the prime rental market, the average rent has reached £4,224, reflecting a year-on-year increase of 6.4%. The strongest prime rental growth is observed in the East of England, which has seen an impressive annual rise of 10.2%.

Increasing Supply  

A significant factor contributing to the moderation of rental growth is the rise in available rental properties, which has increased by 13% compared to the same time last year, helping to improve the balance between supply and demand (Rightmove). However, the number of prospective tenants looking to move has decreased by 16% compared to last year. Despite these improvements, an imbalance in supply and demand persists, with six out of ten agents reporting that there are typically more than ten applicants for each rental listing*. Average void periods remained stable at 21 days in December, although this represents a notable increase from just 11 days in July, when demand was at its peak (Goodlord).

What is influencing the rental market?

The rise of remote work has significantly influenced the rental market, prompting many renters to explore options beyond major cities as individuals seek larger homes at more affordable prices. There has been a notable shift in priorities, space and comfort have become paramount, with an increasing demand for properties that can accommodate home office setups. This trend is further fuelled by a growing appreciation for outdoor spaces, as people look for environments that enhance their overall quality of life.

Moreover, the flexibility afforded by remote work has transformed the dynamics of living arrangements. Renters are now more inclined to consider suburban and rural areas that might have been overlooked in the past. This change not only impacts where people choose to live but also what features they prioritise in rental properties. As a result, landlords and property managers are adapting to meet these evolving demands, recognising the importance of offering amenities that cater to the new lifestyle preferences of renters.

What about buy-to-let rates?  

According to Moneyfactscompare.co.uk, the current average two-year buy-to-let mortgage rate stands at 5.31%, while the average five-year fixed rate is 5.47%. These rates appear quite competitive compared to the higher rates seen in recent years, which approached 7% during the summer of 2023. Additionally, buy-to-let investors now have a wider selection of mortgage products available, with approximately 2,220 options currently on the market, marking a 12.9% increase over the past year, as reported by mortgage advisers.