Rental prices in the UK have cooled outside London for the first time in five years, marking a potential turning point in the country’s housing market. While rents in the capital showed marginal growth, the slowdown reflects easing demand and improved property availability.
The shift in rental trends comes after years of sharp increases driven by low housing supply and fierce competition. However, as tenant demand softens and more properties enter the market, this decline signals a subtle rebalancing of the rental landscape.
Demand Eases as Tenants Explore New Options
Outside of London, average advertised rents dropped by 0.2% to £1,341 between the third and fourth quarters of 2024, largely due to a decline in tenant inquiries. The cooling demand, which is down 16% from a year ago, comes as rising incomes and falling mortgage rates have made homeownership more appealing to some renters. Because moving can be expensive, some people have decided to stay in their current residences.
Despite this decline, competition in the rental market remains intense. Data reveals that each property still receives an average of 10 applications, double the pre-pandemic norm. While rental property availability increased by 13% compared to 2023, driven partly by new listings and investments, it has not been enough to fully alleviate market pressures.
London Sees Slowest Rental Growth in Years
In contrast to the national trend, London rents rose marginally by 0.1% quarter-on-quarter to £2,695. This growth, the slowest since early 2021, reflects the enduring strain on the capital’s housing market. Annual rental growth in London now stands at 2.4%, significantly lower than in previous years.
Landlord activity also reveals mixed patterns. While some landlords have exited the market due to rising operational costs and stricter regulations, others have consolidated their positions, contributing to the stabilisation of supply. Nevertheless, the capital’s affordability crisis persists, with demand still far exceeding the available housing stock.
Implications for Tenants and Landlords
Tenants may find some respite from the rental price moderation, but this comes amid persistent affordability issues. Tenants continue to struggle with few options and intense competition for properties, as rents are still much higher than they were before the outbreak.
Further changes to the rental industry are anticipated as a result of impending regulatory changes, such as modifications to stamp duty thresholds and the proposed Renters’ Rights Bill. Both landlords and tenants are getting ready for possible disruptions in the upcoming months, even though their immediate effects are yet unknown.
Although it is cooling, the rental market in the UK is still far from balanced. The urgent need for long-term solutions to housing supply and affordability is highlighted by this changing environment.
