Rents will carry on rising next year as the supply of rental homes continues to be outstripped by demand – but an ‘inflection point’ where rents become too expensive for many tenants will eventually arrive, and already has done in London, it has been claimed.

That’s the commentary from estate agency Savills, whose associate director Guy Whitakker (main image) says there has been little improvement on the supply this year, a situation that will continue during 2025.

“RICS’ propertymarket surveys have continually reported a lack of new rented homes coming to the market - this is borne out by the latest snapshot of listings on the market, with the number of available rental listings per letting branch 16% below its 2018-19 level during September,” he says.

“High demand and low supply has been the influence behind the significant rental growth seen over the past few years.

“And at a national level, this pattern looks set to continue into 2025, with rents expected to rise above incomes again. But there are signs in some markets, especially London, that affordability constraints are starting to outweigh the supply and demand imbalance.”

Previous year

Savills says that during the 12 months to September 2024, rents grew 4.3% nationally, less than half the rate of the previous year.

London rents grew by just 1.7%, it says, with strong growth in rents stretching the finances of those living in the private rental sector, limiting the capacity for further increases.

“The opposite is true in the capital. Here we have already seen the drag effect of affordability being felt in recent months,” adds Whittaker.

But he warns that he can’t see where new supply will come from to reduce rents as more landlords exit the market than usual in the face of legislative, tax and regulatory pressures and in particular the extra costs of upgrading homes to a minimum C-level EPC, his report says.

Picture: Savills.com