What’s Driving the Changes in the Market?

The key reason behind this shift is the improving balance between supply and demand. Over the past year, the number of available rental properties across the UK has increased by 13%, while the number of prospective tenants has dropped by 16%. This represents a welcome shift after years of demand outpacing supply, which has driven up rents at record levels.

Several factors contribute to this change:

  • Supply Improvements: More rental properties are entering the market, particularly in regions like the North East, where supply has grown by 30%. However, the increase is less pronounced in areas like Wales, which saw only a 3% rise.
  • Reduced Tenant Demand: Tenant interest has decreased as some renters, particularly first-time buyers, transition into the sales market. Falling mortgage rates and rising wages have made home ownership more feasible for many, reducing pressure on the rental market.
  • Tenant Stability: Many tenants are choosing to remain in their current homes rather than face the high costs associated with moving. This includes expenses such as deposit transfers, moving fees, and higher rents in new properties.

Despite these changes, the market remains competitive. An average of 10 applications are submitted for each rental property, which is twice the pre-pandemic norm.

 

Impact on Landlords

While the slowdown in rent growth may be concerning for landlords, the market is far from stagnant. Many landlords continue to invest in their buy-to-let portfolios, particularly those who can weather the challenges of higher mortgage rates and tighter regulations.

However, the report highlights a growing trend of landlords exiting the market. In 2024, 15% of homes listed for sale were previously rental properties, up from 13% in 2023. London has been especially affected, with nearly one in four homes for sale having been rental properties. This suggests that affordability pressures and legislative changes, such as the proposed Renters’ Rights Bill, are pushing some landlords to reconsider their investments.

For landlords choosing to remain in the market, pricing has become a delicate balancing act. With tenants becoming more selective, accurately pricing properties is crucial to securing tenancies and avoiding costly void periods. John Baybut, Managing Director at Berkeley Shaw Real Estate, notes that landlords “have to be careful to price accurately right now, despite their own affordability pressures with high mortgage rates.”

The upcoming Renters’ Rights Bill is another factor to watch. Though its immediate impact on the market appears limited, the bill represents a significant shift in tenant protections and could further influence landlord strategies in the coming months.

 

Opportunities and Challenges for Tenants

For tenants, the improved supply of rental properties brings hope of a more balanced market. With more choices available and slightly less competition, tenants in some regions may find it easier to secure a home.

However, the benefits of this shift are unevenly distributed across the country. In the North East, where supply has grown significantly, tenants are more likely to see lower rents or have more negotiating power. In contrast, areas like Wales, where supply improvements have been minimal, are likely to remain challenging markets for renters.

Even with improved supply, affordability remains a major concern. The average advertised rent outside London is still 4.7% higher than a year ago, and in London, tenants face record-high rents averaging £3,180 in Inner London and £2,341 in Outer London. These figures highlight the ongoing financial strain for many renters, especially those in urban areas where demand remains strong.

Additionally, the upfront costs of moving—such as deposits, agency fees, and higher rents—continue to deter some tenants from relocating. As a result, many renters are opting to stay in their current homes, creating a more stable but less dynamic market.

What the Future Holds

The outlook for the rental market will depend on several factors, including economic conditions, regulatory changes, and the evolving balance of supply and demand. While the recent decline in rents is a welcome relief for tenants, it may not signal a long-term trend. The market remains historically competitive, and affordability challenges persist.

For landlords, the current environment demands careful planning and professional management. The importance of setting the right price, ensuring compliance with evolving regulations, and maintaining attractive properties cannot be overstated. Working with experienced letting agents can help landlords navigate these challenges and secure reliable tenancies.

For tenants, the improving supply offers a glimmer of hope for more affordable rents and greater choice. However, the market’s regional disparities mean that renters in some areas will continue to face intense competition and high costs.

Conclusion

The rental market’s first decline in average advertised rents since 2019 is a significant milestone, reflecting an evolving landscape where supply and demand are gradually rebalancing. While this brings opportunities for tenants, landlords must adapt to a more competitive and regulated market.

As the UK rental market continues to adjust, both landlords and tenants will need to remain flexible and informed to make the most of these changing dynamics. Whether it’s setting the right rent or finding the perfect home, navigating this new phase of the market will require careful consideration and strategic decision-making. For both parties, working with trusted professionals can make all the difference in achieving success in an ever-changing market.

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