Prime London & UK rental market update Q3 2025

Rental growth is easing across the UK with the largest rises in the North of England. In the prime London market, rental growth has stabilised at a rate of just under 2%, but activity levels have picked up in the busier summer season.

As the Renters’ Rights Bill progresses towards becoming law, some landlords are reviewing their portfolios and exploring sales.

Key facts:

Average prime London rents up 1.9% in the year to the end of June
Prime London rents have risen 11% over the last three years, but the rate of growth has been stable at under 2% for the last nine months
Average rents in prime central London down -0.3% on the year, while rents in prime North and East market up 2.3%

Average rents across the prime London rental market have risen in a sustained fashion over the last four years, but this came after a prolonged period of rental declines. Prime rents are now some 13% higher than the previous market peak in 2015.

The pace of rental growth gained real momentum after the pandemic as more people returned to city living, but affordability pressures and increasing supply curbed the double-digit rental growth registered in 2021 and 2022. Prime rental growth has now been stable at around 1.9% since September last year.

Price sensitivity remains evident in all markets, especially in the prime central London market, where the average rent for houses has slipped by 1.6% on the year. This reflects the generally higher price brackets for houses as compared to smaller flats, and it is as the top-end of the market (whether for larger flats or houses) that there is the most downward pressure on rents currently.

Rental growth for properties in prime outer London is still firmly in positive territory, with strong demand for flats and houses in well-connected locations.

The Renters’ Rights Bill is expected to receive Royal Assent when MPs return to Parliament in September and to be implemented towards the end of the year or early next year. The rules around setting rents within the bill could prompt some rent reviews through the rest of the year, and some landlords may also choose to review their portfolios, with evidence already emerging that some landlords are investigating the sales market. This may serve to restrict supply into the market next year, and could put upwards pressure on rents.

Agents report that well-priced and well-presented rental properties are attracting strong demand as students and families look to make a move before the start of the new school and University year. Likewise, the corporate relocation market remains strong.

We expect prime rents to rise +3.0% this year and +3.0% next year.

UK rental market

Key facts:

Average UK rental growth was 6.7% in the year to June 2025, down from 7% in May and the 9% peak in December last year, according to the ONS
Zoopla reports that average newly agreed rents were up 2.8% in the year to April
Increased supply and affordability constraints limiting rental growth

Demand for rental properties across the UK is down 16% over the last year, according to Zoopla. But to put this in context, demand is still 60% higher than before the pandemic, meaning that in some markets the imbalance between the demand for and supply of rental property remains, putting a floor under rental growth. Higher interest rates in recent years have also constrained the ability of some would-be homebuyers to purchase a home, meaning more people staying in the rental sector for longer. As rates are now starting to fall, and with the loosening in mortgage lending stress tests, more renters with aspirations to own a home will be able to step onto the property ladder, potentially lowering demand.

At the same time, rises in the cost of living are putting increased pressure on household finances, meaning affordability is becoming more of an issue in the rental market, and this is putting a lid on rental growth. After the very sharp rises in rents registered in the wake of the pandemic, the market is recalibrating.

The markets where housing is more affordable, eg in the north of England, are still registering the strongest rises in rents, with rental growth at 7.9% in the North West and 9.7% in the North East of England according to the ONS. The more forward-looking rental index from Zoopla, which captures the movement in rents for new lets agreed, also shows the highest growth in these two regions, at 4.6% and 5.2% respectively.

The Renters’ Rights Bill will likely be enacted early next year, and some landlords may choose to explore the sales market before then. However, there is still evidence that larger investors are buying rental properties, looking at the steady long-term income on offer from these assets.