The UK rental market is showing signs of balancing, with rent inflation slowing to its lowest rate in 3.5 years. Rents have increased by 3% in the last year, a significant drop from 7.4% in 2023. The average rent for new lets now stands at £1,284 per month, up £3,000 from three years ago.
Supply and Demand Shifts
The supply of rental properties has improved, with 11% more homes available for rent compared to the previous year. However, rental demand has decreased by 17%, with 12 renters competing for each home. Although competition remains higher than pre-pandemic levels, it’s a notable decrease from the peak demand of 2022-2024.
Despite the increase in rental supply, affordability remains a key issue. The cost of renting has risen by £3,000 annually, making it harder for lower-to-middle-income renters to keep up. As a result, many renters are choosing to stay longer in their current homes, further limiting available rental stock.
Regional Variations
The rental market has seen varied growth across the UK. The North-East and Scotland have experienced the greatest increase in available rental homes, with supply rising by 23% and 29%, respectively. In contrast, the West Midlands saw a 10% decrease in rental supply. Rental inflation ranges from 1.1% in London to 6.3% in the North-East, highlighting regional differences in supply and demand.
Outlook for 2025
Looking ahead, rental prices are expected to rise by 3-4% in 2025, with slower growth in large cities and faster increases in more affordable areas. However, the rental market faces challenges due to policy changes, including the Renters’ Rights Bill and stricter energy efficiency requirements, which could limit new supply.
Overall, while the rental market is stabilising, affordability concerns and limited supply will continue to affect tenants, particularly those on lower incomes. The market is expected to remain competitive, and renters should be prepared for ongoing upward pressure on prices.