Rental growth in London has slowed sharply, with average rents rising just 0.4 per cent in June—marking the weakest rate of increase since the height of the pandemic.
Estate agency Hamptons has now cut its 2025 forecast for rental price growth across the UK to just 1 per cent, down from a previously expected 4.5 per cent.
If this prediction proves accurate, it would represent the lowest annual rental increase since 2018, signalling a significant recalibration in the rental market after several years of double-digit growth.
Hamptons, which is owned by the Connells Group, said that falling mortgage rates and a cooling labour market were contributing to a faster-than-anticipated slowdown in demand for rental homes. According to its latest research, the number of would-be tenants has dropped by 11 per cent compared with summer 2024 and is now 19 per cent below pre-pandemic levels.
Aneisha Beveridge, head of research at Hamptons, said: “The rental market has softened more quickly than we anticipated towards the end of last year. What initially appeared to be a London-centric slowdown has now spread across the country. More affluent renters are becoming first-time buyers, while the economic slowdown is limiting what others can afford.”
The capital, along with Scotland and Wales, recorded outright falls in average rents in June. By contrast, rents continued to rise in parts of the Midlands and the northwest of England—up 3.3 per cent and 2.8 per cent respectively on an annual basis.
Overall, the average rent on a newly-let property outside London now stands at £1,133 per month, according to Hamptons. That’s £317 more than at the start of 2020—an increase of 39 per cent in just five years.
The slowdown will be a welcome reprieve for many renters, particularly those in London, who have faced sustained cost pressures amid a supply-demand imbalance. However, Beveridge was keen to point out that the easing of growth may be short-lived.
“This isn’t the end of the rental growth story,” she said. “The structural shortage of rental homes remains unresolved and upcoming regulatory changes, such as the Renters’ Rights Bill and new EPC requirements, are likely to constrain supply further and add to landlords’ costs.”
Hamptons also flagged a significant slowdown in the build-to-rent sector, with fewer new developments expected to come to market in the near future. This combination of regulatory pressure, rising compliance costs and under-supply could reignite rental inflation from next year.
Indeed, Beveridge still expects rents to increase by 3.5 per cent in 2026 and by a further 3 per cent in 2027, suggesting that the current pause in growth may offer only temporary relief before underlying supply issues return to the fore.
