A Glimpse into the 2025 Rental Market: Trends and Predictions
As we approach 2025, many renters are wondering what the rental market will look like. After reviewing the trends of 2024, our experts offer insights into what might unfold in the coming year, including potential shifts in rental prices and market dynamics.
Rental Demand Remains Strong but Shows Signs of Easing
In early 2024, the rental market was seeing an average of 19 enquiries per property. By the end of the year, this number has decreased to 11. However, it's important to note that this is still almost double the amount of inquiries seen before the pandemic in 2019, when there were only six enquiries per rental property.
This decrease in demand is accompanied by a 7% increase in the number of available rental properties compared to last year, while the number of people looking to move has dropped by 19%. These factors suggest that the rental market in 2025 could be less frantic than in recent years, offering a more balanced environment for renters.
Slower Rent Increases Expected in 2025
After several years of rapid rent hikes, 2024 saw the smallest rent increase since 2021. Rents outside London now average £1,339 per month, reflecting a 4.5% year-over-year rise. Meanwhile, London rents have increased by 2%.
Looking to the future, experts anticipate a more moderate increase of around 3% in rental prices across the UK in 2025. The rise in London rents is expected to be slightly higher, influenced by the renewed interest in city centre living post-pandemic and the return of some workers to office spaces. According to property expert Tim Bannister, the shift in the supply-demand balance, though improving, means agents are still handling a significant volume of tenant inquiries. This dynamic is expected to drive steady, yet moderate, rent increases in the coming year.
Affordability Challenges Persist
The gap between rent increases and wage growth continues to be a major concern for renters. Over the past five years, rents have surged by 40%, while wages have only increased by 28%. As a result, many renters are reaching their financial limits, often referred to as the “affordability ceiling,” where they can no longer comfortably afford rising rents.
In response, landlords are adjusting their pricing strategies. Currently, 26% of rental properties have seen a reduction in asking rents, up from 23% in 2023. Bannister points out that two factors are driving this trend: the continued pressure from supply-demand imbalances pushing prices upward, and the increasing affordability challenges renters face. This tension is contributing to the rise in rent reductions.
Key Takeaways for Renters in 2025
While rental prices are expected to rise more slowly in 2025, the market is likely to remain competitive. The increased availability of rental properties and the trend of price reductions may offer some relief, but renters should be prepared for a dynamic and potentially challenging search. To make the process smoother, it's important to start your search early and stay informed about market conditions.