What could happen in the rental market this year? Along with a look at what unfolded in 2024, our experts predict what we could see in the next 12 months – as well as where rental prices might end up by the end of the year.
Demand for rental homes remains high, but down from its peak
Earlier this year, we saw an average of 19 enquiries per rental property, and this has now fallen to 11 enquiries per home advertised for rent. But it’s worth noting this is still almost double the six enquiries per property we were seeing in the pre-pandemic market of 2019.
Since the same period in 2023, we’ve seen both a drop in the number of people looking to move (-19%), as well as an improvement in the supply of rental homes available (+7%). So, we could be in for a calmer rental market in 2025 than we’ve seen in recent years.
Rents set to rise in 2025, but more slowly than in recent years
After years of sharp increases to average rents, this year saw the smallest percentage increase since 2021. Average rents outside London have hit £1,339 per month, which is 4.5% higher than this time last year, and in London, rents are up by 2%.
Looking ahead, we predict advertised rents will rise by 3% both inside and outside London in 2025. The higher rent rise we’re likely to see in London next year comes as city centre living is back in vogue after the pandemic race-for-space years, and some companies call their workforces back to the office.
Our property expert, Tim Bannister, says: “Whilst at a top level, we’ve seen overall improvements in the balance between supply and demand, agents tell us they are still extremely busy and having to manage high volumes of tenant enquiries. We’re therefore likely to see a more normal figure of around 3% growth in newly advertised rents next year.”
Affordability pressures will continue to have an impact
It’s no secret that rents have outpaced wage growth in recent years. Over the past five years, average rents have climbed 40%, while wages have risen by 28%.
Renters reaching an ‘affordability ceiling’ – where they’re hitting the limits of what they can afford in monthly rent – teamed with landlords keen to keep their homes tenanted, has led to 26% of rental properties having their asking rents reduced right now – up from 23% during the same period last year.
Tim adds: “There are two competing factors influencing rental price changes right now. The ongoing imbalance between supply and demand is putting upwards pressure on prices. On the other hand, rent rises outpacing wage growth over the past five years has stretched affordability to extreme levels, and is showing in the increasing number of price reductions.”
Source: Rightmove
