It’s a mixed picture in the UK property markets - UK rents fall for first time in five years, house sales rise and commercial recovery stalls.
For the first time in more than half a decade, rental prices across the UK have started to decline. It’s a notable shift in the residential housing market, but bucking the trend has been the London renters’ markets which continue to face increasing costs.
The data provided by property search platform Rightmove shows the average asking price for rental properties outside of London dipped by 0.2%, an admittedly small decline which brings the average monthly rent outside of London to £1,341. It’s a small monthly reduction of just £3 but Rightmove considers the amount a significant trend, being the first recorded decline since late 2019.
Any discernible peak suggests an improvement in the supply-demand balance and will come as something of a relief to renters. The long run of increases followed the Covid pandemic, reaching the highest increases per annum in 2022. Rightmove's figures indicate a substantial increase in supply outside of London, the number of available rental homes having risen by around 13% over the past year.
On the other hand, demand seems to have stalled, with the number of prospective tenants declining by something like 16% over the same time-period. In the Northeast, supply has seen the most significant boost. Some industry experts think that improving mortgage availability and affordability along with rising wages and lower house price inflation is enabling more tenants to transition to homeownership.
According to The Times newspaper, despite a drop in rental prices, they remain elevated at 4.7% higher than this time last year. But this still represents the slowest annual increase since 2021 with a peak in rental price inflation occurring in 2022 when it surged by 12%. This has been a painful time for renters with the market experiencing intense competition. On average, every rental listing receives ten applicants, this demand is double the pre-pandemic levels.
While rental prices appear to be peaking outside of the capital, London continues to experience record rises. The average monthly residential rent in London is now at an eye watering £2,695, including the latest 2.4% annual increase. Although 2.4% is the lowest London growth rate in nearly four years, rents in the city have consistently hit highs each quarter since the ending of the pandemic, late 2021.
Alex Bloxham, head of residential lettings at property agency Bidwells told The Times that the rental market had been exceptionally competitive over the past year. The limited supply has been driving up prices. One major factor has been landlords leaving the private rented sector (PRS) in the face of declining profitability and increasing regulations, and in anticipation of major changes coming in Labour’s Renters’ Rights Bill.
In a relatively short time, that is since the first lockdown in March 2020, the Times observes that rents outside of London have increased by 64%, while those in London have risen more modestly by 28%. Tenants will be hoping that the recent easing in house prices will help them shift from renting to the home owning market.
The rental market could face some significant change with the introduction of the Renters’ Rights legislation, slated for some time this current year. With the aim of giving tenants greater security and a more stable rental market, tenants have yet to find out what effect the new measures will have on prices. Rightmove has indicated that the bill may have little impact on current market trends, though other experts disagree.
While the rental market outside of London appears to be peaking, the private housing sales market has had its strongest January start in three years, with agreed sales up by 12 per cent, according to figures generated by the property portal Zoopla.
So far in 2025 the portal has seen a 10% increase in listings on the site, that’s compared to the same time last year, even though buyers face higher mortgage rates and there’s a real challenge to consumer confidence following last October’s budget.
Richard Donnell, Zoopla’s Executive Director, told The Times newspaper:
“The year 2025 has had a strong start, outperforming both 2024 and 2023. This is a positive indicator for market activity for the remainder of the year, bolstered by the fact that more people are looking to move.
"Increasing incomes and reductions in base rates will enhance affordability and boost consumer sentiment," he said.
There appears to be some impetus behind trades as buyers want to avoid the upcoming increase in stamp duty from April. It’s then that the eligibility threshold for first-time buyers will come down from £425,000 to £300,000.
Mr Donnell said:
“It’s crucial not to overinterpret the rise in stamp duty. Three out of five first-time buyers will still be exempt from it starting April. The additional costs for homeowners remain manageable and are unlikely to dampen sales.”
Healthy job markets are a deciding factor as Zoopla observes that the increase in property sales tends to be in locations where employment levels was robust, and the company has predicted the trend will persist throughout the year. Over 20% of those who are now renting are considering buying a property, according to Zoopla.
UK house price inflation rose to 2% year-on-year in December 2024, driven by an increase in sales according to The Times, while Northern Ireland experienced the steepest growth, with average prices rising by 7.7%. In the capital by contrast, London saw only a 1.4% rise in house prices. In Eastern England the rise was just 1% and Zoopla says it anticipates that average house prices will grow by 2.5% in the coming year, with sales projected to reach 1.15 million, marking a 5% rise from 2024.
However, Zoopla qualified these findings by stating that the price rise is beginning to stabilize “as mortgage rates gradually increase and buyers have ample homes to select from.”
Despite signs of a steady recovery during and up to the third quarter of 2024, the UK’s Commercial Property Market began to falter slightly in the fourth quarter Q4 as data now becomes available, according to RICS.
The long-term outlook remains positive, thinks the Chartered Surveyors professional body, this buoyed up by “a resilient and competitive prime office sector as well as industrial property demand”
RICS’ Head of Market Analytics, Tarrant Parsons, finds that although respondents to a survey thought the market had entered an early upturn phase in Q3, in Q4, sentiment actually “went flat”.
Retail property saw another fall in demand, but industrial and office demand managed to remain positive, though both these sectors were below those seen in Q3.
There’s a big divide in rent expectations between prime and secondary properties. Prime industrial property has a slight edge over prime office rents, but sentiment towards future rental prices for secondary office and secondary retail space remains negative. Secondary office space in London was particularly negatively rated.
High energy costs and working from home, as well as the capital investment needed to bring secondary offices up to the required environment standards, leads RICS to the conclusion that there’s a chasm of interest between high-quality, energy-efficient commercial property and the secondary market. This is likely to persist as some secondary property will be uneconomic to bring back onto the rental market and ironically uneconomic to demolish also, thinks RICS.
In the short-term capital values are declining. Q4, 2024 saw values decline as fallout from the Autumn Budget and the uncertainty this produced in the bond markets. According to RICS survey returns, investment enquiries remained flat-to-negative for both office and retail space. Industrial space on the other hand produced a more positive reply with a modest increase.
RICS Head of Market Analytics, Tarrant Parsons, commented:
“The closing quarter of 2024 saw sentiment in the UK Commercial Property market soften a little, with bond market uncertainty impacting credit conditions and investment.
“The latest announcements by the Chancellor should help support confidence in the real estate sector.
“This has not, however soured long-term confidence in the market. Prime industrial and office assets continue to demonstrate resilience, and the gap between modern, energy-efficient commercial property and the rest expanded again.
“According to some of our respondents, rising rents are enabling developers to refit and improve their properties in what is a competitive prime market.
“Many are employing a ‘wait and see’ attitude towards the commercial property sector and the impact of the government’s policy package, reflected in a flatter outlook this past quarter. The latest announcements by the Chancellor should help support confidence in the real estate sector.”
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