Cooling, But Still Costly: The UK Rental Landscape in Transition
Welcome to our UK Rental Market Update April 2025. As we move through the second quarter of 2025, signs are emerging that the UK rental market is beginning to stabilise. However, renters are still facing above-average price growth, ongoing supply constraints, and persistent demand pressures. This month’s data reveals a market that is cooling—but not easing.
In April 2025, actual rental inflation eased to 4.0%, a modest dip from March’s 4.2%. While this is a welcome sign of slowing, it remains well above the pre-pandemic average of 2–3%, continuing to squeeze affordability for many households.
Meanwhile, forecasted rent growth for the full year has been revised slightly down to 3.1%, reflecting expectations of a gradually cooling market.
Forecasted vs. Actual Rent Growth (2022–2025):
Key reasons for the slowdown:
Many tenants have hit affordability ceilings.
Wage and inflation stability has softened upward rent pressure.
Some regional rebalancing in supply and demand is emerging.
Rental Inflation Softens Slightly
Demand Eases—but Remains Elevated
After reaching a high of 200 in 2024, the UK rental demand index dipped slightly to 193 in April 2025 (base year 2022 = 100). This softening is modest and largely reflects renters consolidating households or relocating in search of better value.
Rental Demand Index (2022–2025):
Why demand remains strong:
High mortgage rates continue to delay homeownership plans.
Renting is a longer-term option for many professionals and families.
Chronic undersupply of homes is trapping renters in place.
Supply Pipeline Continues to Shrink
The number of new housing units receiving planning permission dropped to just 35,500 in Q1 2025—down from 38,000 in 2024 and a sharp fall from 50,000 in 2022. This is one of the most pressing issues facing the sector.
Ongoing concerns include:
- Planning system delays and uncertainty.
- Landlord exits due to regulation, taxation, and rising finance costs.
- Insufficient scale of build-to-rent developments.
Combined View: Key Market Pressures at a Glance
This multi-axis chart provides a clear overview of all the trends shaping the rental market between 2022 and 2025
Outlook: Moderation Without Relief
While rent growth may be slowing, renters are not yet feeling real relief. Demand remains strong, supply is shrinking, and affordability pressures are entrenched. Without meaningful reform—particularly in planning policy, rental regulations, and housing investment—many of these issues are likely to persist well into 2026.
