The end of 2024 has brought significant developments to the renting market in the UK, with shifts influenced by economic, social, and political factors. For renters, landlords, and property investors, understanding these trends is essential to navigating the evolving UK rental market. In this comprehensive report, we explore the key highlights, challenges, and opportunities that shaped the rental landscape this month.
Annual rents have risen by £3,240 over the past three years, with the most significant increases occurring in the UK’s more affordable areas. Explore what’s in store for rent in 2025 in our latest Rental Market Report.
Key Takeaways
- Annual rents are 3.9% higher than last year—the lowest growth rate in three years.
- Rental inflation over the past 12 months ranged from a high of 10.5% in Northern Ireland to a low of 1.3% in London.
- Although the imbalance between supply and demand is narrowing, it will remain a defining feature of the rental market in 2025.
- Affordability will increasingly constrain rental inflation in areas with the highest rents.
- The average annual UK rental cost has risen by £3,240 since 2021—a 27% increase compared to earnings growth of 19%.
- Rents are expected to increase by an average of 4% in 2025, with more affordable areas driving growth, while London and large cities are likely to lag behind.
Rental Market Report December 2024: Rental Demand Falls from a High Base
Key Figures
- The average rent for new lettings in the UK is £1,270 as of October 2024.
- Annual rental growth slowed to 3.9%, the lowest rate of increase in over three years.
| October 2024 | July 2024 | April 2024 | |
| Average rent (new lets only) | £1,270 | £1,245 | £1,226 |
| Annual rental growth | +3.9% | +5.4% | +6.6% |
UK Rental Inflation Hits a Three-Year Low
UK rents increased by 3.9% in the 12 months to October 2024, down from 9.1% the previous year. The average rent now stands at £1,270 per month. This marks the first time since September 2021 that earnings growth has outpaced rental growth.
Supply and Demand: Narrowing the Gap
Rental growth has eased as the imbalance between supply and demand diminished. The supply of rental properties has increased, with the average letting agent reporting 12% more homes for rent than last year. However, the supply remains 18% below pre-pandemic levels.
Rental demand is 29% lower than in 2023, partly due to fading pandemic-related factors and reduced migration for work and study. Despite this, inquiries for rental homes remain 31% higher than pre-pandemic levels.
While affordability constraints in high-cost areas are expected to moderate rental growth in 2025, the imbalance between supply and demand will maintain upward pressure on rents.
The Cost of Renting: Up by £3,240 in Three Years
Rents for new lets are now £270 per month higher than three years ago, adding £3,240 annually—a 27% increase since 2021. This growth has far outpaced the 19% increase in average earnings over the same period.
Affordability pressures are likely to limit rent increases in areas with already high rental costs, particularly in London and major cities. However, rents in more affordable areas still have room to rise.
Regional Differences in Rental Inflation
Rental inflation has slowed across all UK regions over the past year, with the exception of Northern Ireland, where rents are increasing from a low base.
- Northern Ireland: +10.5%
- North East: +8.7%
- London: +1.3% (down from 8.7% last year)
Rents are rising fastest in areas with lower average rental costs, including Rochdale (+11.9%), Blackburn (+10%), Birkenhead (+9%), Burnley (+8.9%), and Newcastle (+8.7%).
Rental Supply in 2025: Limited Expansion
While the supply of rental homes has improved slightly compared to last year, it remains below pre-pandemic levels in most regions. Private landlords continue to exit the market due to regulatory and financial pressures, despite rising rents.
Corporate investment in new-build rental properties is providing some relief, but higher borrowing costs and tighter regulations have slowed development.
Factors Driving Rental Demand
Several factors will continue to support demand for privately rented homes in 2025:
- The high cost of homeownership for first-time buyers.
- Migration for work and study.
- Limited growth in the social housing sector.
However, tighter visa rules and the fading of pandemic-related factors are reducing demand somewhat.
Outlook for 2025: Headroom for Growth
Rents for new rentals are expected to rise by 4% in 2025, outpacing the 2.5% growth forecast for house prices. Growth will be driven by more affordable areas, particularly smaller towns and rural locations with good transport links to cities.
In contrast, rental inflation in London and larger cities is expected to lag due to affordability constraints and a modest increase in supply.
Understanding Rent Inflation Measures
It’s important to distinguish between different measures of rental inflation:
- Zoopla Index: Tracks rents for new lets (c.25% of properties annually).
- ONS Index: Covers both new lets and existing tenancies (75% of properties).
While Zoopla’s index reflects more immediate market changes, the ONS index provides a broader view, often lagging behind.
Both measures are valuable but serve different purposes. For instance, Zoopla’s index is akin to measuring the temperature of hot water entering a bath, while the ONS index measures the temperature of the entire bath.
Investing in Property in Edinburgh
The lead-up to Christmas often sees a slowdown in Edinburgh’s private rented property market. However, the final quarter of 2023 bucked the trend, delivering impressive figures for rental values and time to let.
The final Citylets quarterly report of the year highlighted robust demand for homes of all sizes between October and December, with properties being swiftly turned around between tenancies.
Strong Demand for One-Bedroom Homes in Edinburgh
One-bedroom properties were particularly sought after in Q4, with a 14% year-on-year increase in rents and an average letting time of just 13 days. Notably, 89% of one-bedroom homes were let within a month, driven in part by students returning to Edinburgh after the summer break in search of accommodation.
The average monthly rent in Edinburgh during Q4 was £1,503—a year-on-year rise of nearly 10% and a staggering 83% higher than a decade ago. Moreover, 81% of all properties in the city were let within a month. Interestingly, the new licensing requirements for short-term lets do not yet appear to have affected the supply in the long-term rental market.
Short-Term to Long-Term Letting: A Shift for Tenement Landlords?
Landlords whose properties were deemed unsuitable for short-term lets, particularly in Edinburgh’s tenement blocks, were expected to transition to long-term letting following the introduction of new regulations.
By 1 October 2023, all short-term let operators were required to apply for a license. However, holding a license will not become a legal requirement until 1 January 2025. As applications are processed and some licenses are refused, more properties may gradually enter the long-term rental market.
Nevertheless, legal challenges to these new short-term let policies remain ongoing. In December, the Court of Session deemed Edinburgh’s short-term let control area to be “not only unfair but illogical.”
Rent Increases Make a Return
The conclusion of the Cost of Living (Tenant Protection) Act (Scotland), which was introduced in October 2022 to shield tenants during the cost-of-living crisis, signals significant changes for landlords. From 1 April 2024, landlords will no longer be restricted to maximum rent increases of 3%, although only one rent rise will be permitted within a 12-month period. Evictions that were previously paused under the Act can now proceed.
Landlords will once again be able to adjust rents to align with current market rates. However, tenants can appeal to the rent officer if they disagree with the proposed increase. The rent officer will apply a tapering formula, allowing rent increases of up to 6% where the gap between current and market rent is modest. For larger gaps, the maximum allowable increase is capped at 12%, provided the new rent does not exceed market rates.
The end of the rent cap may lead to increased tenant mobility, as renters are no longer incentivized to stay in properties with protected rents.
A Transformative Year Ahead for the Rental Market
2024 promises to bring further changes to the private rental sector as the Scottish Government is set to release the findings of a consultation with landlords and tenants on rental reform. Key topics under consideration include:
- Rent control
- Rights to keep pets
- Flexibility for personalizing rental properties
- Ending joint tenancies
- Unclaimed tenancy deposits
- Enhanced protections during eviction proceedings
Overall, 2024 is shaping up to be a pivotal year for Edinburgh’s private rental market. If you’re a landlord seeking guidance on these changes, consider arranging a call with one of our expert property management advisors.
Overview of the UK Rental Market
The UK rental market experienced a period of mixed fortunes in December 2024. On the one hand, demand for rental properties continued to surge, driven by a growing population, urbanization, and an increasing number of individuals opting to rent rather than buy. On the other hand, supply constraints, rising costs, and regulatory changes have presented challenges for both tenants and landlords.
Key Statistics:
- Average rent in the UK (excluding London): £1,200 per month.
- Average rent in London: £2,350 per month.
- Year-on-year rental price growth: 6.8%.
- Vacancy rates: 4.2% nationwide, 3.1% in London.
These figures highlight a competitive market where tenants are facing higher costs and reduced availability of properties.
Key Drivers Influencing the Renting Market
1. Economic Factors
The broader economic context has played a pivotal role in shaping the renting market this year. Inflation rates remained relatively high, which has driven up operational costs for landlords, including maintenance, repairs, and property taxes. These costs have, in turn, been passed on to tenants in the form of higher rents.
The Bank of England’s base interest rate hikes have also impacted landlords with mortgages, further increasing the pressure to raise rents. For tenants, stagnant wage growth in real terms has made affordability a significant concern.
2. Population Growth and Urbanisation
Population growth in cities such as London, Manchester, Birmingham, and Glasgow has amplified demand in the UK rental market. Many young professionals, international students, and migrant workers continue to choose urban centers for better job opportunities and lifestyles, creating fierce competition for properties.
3. Lifestyle Trends
Shifts in lifestyle preferences are reshaping the rental sector. Flexible working arrangements have prompted many tenants to prioritize properties with home office spaces or access to green areas. Additionally, renters are showing a stronger preference for energy-efficient homes, reflecting growing environmental awareness.
4. Regulatory Changes
December 2024 has seen a continuation of regulatory adjustments aimed at balancing the interests of landlords and tenants. Key developments include:
- The Renters’ Reform Bill: This legislation, expected to come into full force in early 2025, includes the abolition of Section 21 ‘no-fault’ evictions and new rules for rent increases.
- Energy Performance Standards: Landlords are now required to ensure properties meet minimum EPC standards, with penalties for non-compliance.
While these measures aim to improve tenant protections and environmental standards, they have also added administrative and financial burdens for landlords.
Regional Insights into the UK Rental Market
London
The capital remains the most expensive location in the UK rental market, with average rents now exceeding £2,350 per month. Demand in London has rebounded strongly post-pandemic, fuelled by the return of international tenants and workers.
However, the high cost of living has pushed some renters to consider more affordable options in Greater London or neighboring counties. Areas such as Croydon, Barking, and Hounslow have seen increased demand as a result.
The North West
Cities like Manchester and Liverpool continue to experience strong growth in the renting market, driven by thriving local economies and a younger demographic. The average rent in Manchester rose by 8.2% over the past year, reflecting both demand and the city’s popularity among students and professionals.
Scotland
Scotland’s rental market remains distinct due to its unique regulatory framework, including rent controls in some areas. Edinburgh and Glasgow are the key hotspots, but rural areas have also seen growth as remote working becomes more prevalent.
Wales
Wales has seen modest rental growth, with Cardiff leading the way. However, rural areas have faced challenges, including limited supply and lower tenant turnover.
The South East
The South East remains a competitive region, with towns such as Reading, Oxford, and Brighton attracting renters priced out of London. Commuter towns have gained popularity due to excellent transport links and more affordable housing options.
Challenges in the Renting Market
1. Affordability Crisis
Affordability remains the most pressing issue in the UK rental market. The average tenant now spends over 40% of their income on rent, a figure that rises to 55% in London. This trend is unsustainable for many and has led to calls for further government intervention.
2. Supply Shortages
The shortage of rental properties is a persistent challenge. Several factors contribute to this, including:
- Landlords exiting the market due to increased regulatory and financial pressures.
- A lack of new-build rental properties, particularly affordable ones.
3. Energy Efficiency Requirements
The push for energy-efficient homes has created challenges for landlords. Upgrading properties to meet EPC standards can be costly, especially for older properties. Failure to comply can result in hefty fines, further discouraging investment in the sector.
4. Tenant Protections vs. Landlord Rights
While tenant protections are vital, some landlords feel the balance has tipped too far in favor of renters. Policies like the abolition of Section 21 evictions have created uncertainty, potentially discouraging investment in the rental sector.
Opportunities in the UK Rental Market
Despite these challenges, there are opportunities for both tenants and landlords to thrive.
1. Build-to-Rent Developments
The rise of build-to-rent developments is reshaping the renting market. These purpose-built properties offer high-quality housing with amenities such as gyms, co-working spaces, and community events. For tenants, this provides a better renting experience, while landlords benefit from stable, long-term returns.
2. Technology and PropTech
Technology is transforming the UK rental market, making it easier for tenants and landlords to connect. Online platforms for property management, virtual viewings, and digital rental agreements have streamlined the rental process, saving time and reducing costs.
3. Suburban and Rural Growth
As remote and hybrid working models become the norm, suburban and rural areas are becoming more attractive. Landlords who invest in these regions can tap into growing demand while benefiting from lower property acquisition costs.
4. Green Investments
Landlords who invest in energy-efficient upgrades can not only comply with regulations but also attract eco-conscious tenants. Solar panels, insulation, and efficient heating systems are increasingly seen as valuable property features.
Predictions for 2025
As we look ahead to 2025, several trends are likely to shape the UK rental market:
- Continued Demand Growth: Urban centers will remain hotspots for rental demand, although suburban areas will continue to gain traction.
- Rising Rents: Without significant increases in supply, rents are likely to keep rising, albeit at a slower pace.
- Policy Changes: The full implementation of the Renters’ Reform Bill will create a new landscape for tenants and landlords alike.
- Sustainability Focus: Energy efficiency will remain a priority, driving investments in green technologies.
- Technological Integration: The role of PropTech will expand, making the rental process more efficient and transparent.
December 2024 has been a pivotal month for the UK rental market, highlighting both its resilience and its challenges. For tenants, affordability and availability remain key concerns. For landlords, navigating regulatory changes and rising costs requires careful planning and investment.
The future of the renting market will depend on collaboration between the government, landlords, and tenants to create a balanced and sustainable system. By embracing innovation, focusing on sustainability, and addressing affordability issues, the UK rental sector can continue to evolve to meet the needs of all stakeholders.
As we move into 2025, staying informed and proactive will be essential for anyone involved in the UK rental market. Whether you’re a tenant searching for your next home or a landlord looking to maximize returns, understanding these trends will be key to success.
