0:01 AM, 21st July 2025, About 5 months ago
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Landlords are seeing a slowdown in rent inflation as tenant demand cools, research reveals.
Hamptons says it is cutting its rent growth forecast from 4.5% to a modest 1% for 2025 as tenant interest drops 11% in the first half of the year compared to the same period in 2024.
That demand is now 20% lower than 2019 levels.
The shift is largely down to falling mortgage rates, enabling more renters to buy a home.
The firm’s head of research, Aneisha Beveridge, said: “The rental market 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, with rents declining in multiple regions and growth easing elsewhere.
“A combination of falling mortgage rates and a weaker labour market has shifted the dynamics – more affluent renters are becoming first-time buyers, while the economic slowdown is limiting what others can afford.”
She added: “That said, this isn’t the end of the rental growth story.
“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.”
In June, rents for newly let properties across Great Britain grew by just 0.4% year-on-year, the slowest increase since August 2020.
Notable declines were seen in London (-2.5%), Wales (-0.9%) and Scotland (-0.5%).
London’s rental market saw the steepest fall, with average rents for new lets dropping to £2,288, a level last seen in May 2023.
Inner London faced an even sharper decline, with rents falling 3.8% year-on-year to £2,694.
In Scotland, June marked the first annual rent drop since December 2019, while Wales also saw a downturn.
Lower mortgage rates have also eased financial burdens for landlords, reducing the need to raise rents to offset costs.
Plus, the supply of rental properties has increased by 8% compared to last year, driven not by new landlord investments but by slower tenant uptake.
Hamptons says that properties are now taking longer to let.
Economic challenges are another issue with a weakening labour market with 178,000 fewer payroll employees over the past year.
Unemployment is projected to reach 5% by the end of 2026, and earnings growth is expected to slow from 5% in May to around 3% next year.
That will affect tenant affordability.
Despite the economic issues, rents are expected to rise over the coming years because of a growing shortage of homes to let.
There are 34% fewer properties available compared to 2019, combined with new regulations like the Renters’ Rights Bill and stricter EPC requirements which will also increase landlord costs and reduce supply.
A slowdown in build-to-rent projects is also expected to limit new rental homes entering the market.
Hamptons predicts rent growth of 3.5% by the end of 2026 and 3% by the end of 2027, slightly above projected inflation and wage growth.
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