Falling rents set a new record as landlord investment drops

Rents across Great Britain ended 2025 lower than where they began for the first time on record, as softer demand, easing pressures in London and falling investor activity reshaped the lettings market.

The findings from Hamptons found that newly agreed rents dropped by 0.7%, marking the first full calendar year decline since its Lettings Index began tracking the market in 2011.

The average tenant moving home paid £1,371 a month, £10 less than a year earlier for the same property.

The firm says that what began as a London-focused correction in January has seen falling rents steadily spread to other areas.

By December, five of the 11 regions it monitors were recording annual declines, compared with none a year earlier.

2025 rents end the year lower

Aneisha Beveridge, the head of research at Hamptons, said: “On paper, 2025 looked like a good year for tenants.

“Rents on new lets ended 2025 lower than they started, and tenants had more choice than before.

“However, falling rents were driven more by strong first-time buyer numbers and wider economic weakness than by improved tenant affordability.”

She added: “Fewer tenants are taking their first step into the rental market, with many staying at home longer and being reluctant to commit to the cost of renting a place of their own.”

“It’s possible the implementation of the Renters’ Rights Act may start proving inflationary for agreed rents.

“If landlords start to find the procedural and legal machinery underpinning the new rules lacking, it is likely to slowly squeeze rental homes out of the market.”

Landlords stop investing

Landlords are also increasingly shy about investing and accounted for just 10.9% of purchases last year, down from 12% in 2024 and well below the 15.8% recorded a decade earlier.

It was the lowest share since records began in 2012 and the first full year in which the higher 5% surcharge applied.

The North East remained the most investor-heavy market, with landlords responsible for 29% of acquisitions.

The East Midlands and West Midlands followed, each around 15%.

Although northern England still dominates buy to let buying, falling interest rates shifted attention southwards.

The South East, East of England and North East were the only English regions to see a year-on-year rise in the proportion of homes bought by investors.

London sees rents fall

Hamptons says that London saw the sharpest drop of newly agreed rents at 2.7% last year, that’s down £63 per month.

London’s landlords are seeing rents going back to levels last seen in June 2023.

Falls were also recorded in the South East at -1%, Yorkshire and Humber at -1.4%, Wales at -0.8% and the East Midlands at -0.2%.

Elsewhere, growth slowed and the East of England, South West and Scotland all saw annual increases below 1%.

Current trends suggest each could edge into negative territory during early 2026.

Tenant demand drops

Tenants had more choice as rented home availability improved, ending the year 6% higher than in December 2024 and just 8% below pre-pandemic levels.

During the post-Covid surge, when rents were rising at double-digit rates, stock had fallen to 52% below 2019 volumes.

The recent uplift reflects weaker renter demand rather than a surge in fresh landlord purchases.

While new lets cooled, existing renters continued to face higher renewal costs.

The average renewal increased 3.3% annually to £1,310, narrowing the gap between new and renewed contracts to £61, the smallest difference since mid-2021 and sharply down from the £170 peak seen in October 2023.