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Rents for new homes in the UK are projected to rise by 4% in 2025, which is higher than the expected 2.5% increase in average house prices. According to a report by analysts at Zoopla, rents will rise in price faster than flats themselves over the next 3 years, boosting owners' incomes, especially in more affordable neighbourhoods.
Meanwhile, major cities, including London, are showing a slowdown in rental growth, with rents rising by only 1.3% over the past year, compared to 8.7% in 2023. Rents across the country have risen 3.9% in a year, the slowest rate of growth in 3 years, with the average rent for a new home standing at £1,270 ($1,550) at the end of 2024.
The slowdown is due to a narrowing gap between supply and demand in the rental market. Agencies reported a 12% increase in affordable housing compared to last year. Rental demand fell 29% due to declining migration. Despite this, London remains the most expensive city to rent in, with an average price of £2,190 ($2,673) per month.
The biggest rental increases were seen in Northern Ireland, where rates rose by 10.5%, and in the North East with an increase of 8.7%. In London, price rises were particularly notable in suburban areas such as Havering (5.9%) and Barking and Dagenham (5.2%). Central London boroughs saw increases of less than 1%, with Kensington & Chelsea, Greenwich and Tower Hamlets leading the way.
The incentive for rent increases comes from areas where rents are cheaper, and there is potential for price rises. These include smaller towns with good transport links to larger cities. Rents in these areas are already showing faster growth. Outside London, Rochdale (11.9%), Blackburn (10%), Birkenhead (9%), Burnley (8.9%), and Newcastle (8.7%) have seen significant increases in rental values.
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