Curious about what might happen in the rental market next year? Along with a look at what played out in 2024, our experts predict what we could see in the next 12 months – as well as where rental prices could end up by the end of the year.
Demand for rental housing is still high, but down from the top
Earlier this year, we saw an average of 19 inquiries per rental home and that has now dropped to 11 inquiries per advertised home. But it’s worth noting that this is still almost double the six inquiries per property we saw in the pre-pandemic market in 2019.
Since the same period in 2023, we have seen both a reduction in the number of people wanting to move (-19%), and an improvement in the supply of available rental housing (+7%). So we may have a quieter rental market in 2025 than we have seen in recent years.
Rents will rise in 2025, but more slowly than in recent years
After years of strong increases in average rents, this year saw the smallest percentage increase since 2021. Average rents outside London have reached £1,339 per month, which is 4.5% higher than this time last year, and in London rents have increased by 2 %.
Looking ahead, we forecast that advertised rents will rise by 3% both in and outside of London by 2025. The higher rent increase we are likely to see in London next year comes as inner-city living returns to fashion post-pandemic. space years, and some companies are calling their employees back to the office.
Our property expert, Tim Bannister, says: “While at the top level we have seen overall improvements in the balance between supply and demand, agents tell us they are still extremely busy and have to deal with high volumes of tenant enquiries. We are therefore likely to see a more normal figure of around 3% growth in newly advertised rents next year.”
Price pressure 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 risen by 40%, while wages have risen by 28%.
Tenants hitting an ‘affordability ceiling’ – where they reach the limit of what they can afford in monthly rent – along with landlords wanting to keep their homes rented, has led to 26% of rental properties having their asking rents reduced right now – up from 23% in the same period last year.
Tim adds: “There are two competing factors affecting rental prices at the moment. The ongoing imbalance between supply and demand is pushing prices up. On the other hand, rent increases outstripping wage growth over the past five years have stretched affordability to extremes and are reflected in the increasing the number of price reductions.”
Do you want to rent in 2025? Here’s what you need to know
The slowing pace of rent increases plus an increasing number of price cuts may provide some relief to the rental market next year. That said, it’s likely to remain competitive, so it makes sense to put yourself in the best position when you start your search to your next home.
Fortunately, there are plenty of things you can do to put yourself in the best possible position to secure the home you want in 2025. Take a look at our 5 tips to increase your chances of getting a viewing.
The main picture for this article was provided with permission of Foxtons, Fulham Broadway
READ MORE: Our forecast for the housing market in 2025
