Rents Slowing, But Still High
The average rent in London hit £2,698 in Q1 2025, up just 0.6% from the previous quarter – the smallest increase in recent years. While that might sound like a win for tenants, it’s worth noting that rents are still up 9.9% year-on-year, the highest annual rental inflation in England. So yes, things are cooling slightly – but the heat hasn’t disappeared. Demand is still strong, especially in prime central locations, and the rental burden for many Londoners is growing.
Supply and Demand: A Market Still Out of Balance
There’s been a modest improvement in supply. From January to April 2025, new rental listings increased by 5%, and total rental stock grew by 9% compared to the same period in 2024 A surge in buy-to-let mortgage activity – up 32% year-on-year – has helped bring more properties to market.
But let’s keep it in perspective. The average letting agent is managing just 13 rental properties, up from 11 in 2023, but still well below the pre-COVID average of 17. Until supply meaningfully catches up, renters will likely continue facing limited choice and high competition.
Borough-by-Borough: Where Are Rents Rising the Most?
Not all parts of London are equal. Some boroughs are seeing sharper rent increases than others
- Kensington & Chelsea, Camden, and Canary Wharf remain hotspots for high-end renters and overseas professionals.
- Meanwhile, outer boroughs like Barking & Dagenham, Haringey, and Lewisham are offering more affordability and space.
Improved transport links, like the Elizabeth Line, have made these outer areas more accessible, shifting some of the rental demand further out.
2026 Outlook: Slower Growth, Ongoing Challenges
Experts are predicting rental price growth of around 3.5% in 2026, with total increases of up to 17.6% forecast by 2029. That’s slower than what we’ve seen recently – but still a challenge, especially when wages aren’t rising at the same pace.
In 2025, London renters are spending around 40% of their income on rent, up from 37% just two years ago. For many, this means tough decisions: move further out, share accommodation, or give up on central London altogether.
Advice for Renters and Landlords
For Renters:
- Explore Outer Boroughs: Barking & Dagenham, Lewisham, and Haringey offer better value and improved transport links.
- Shared Living is on the Rise: Teaming up with others to rent could help you stay in desirable locations without breaking the bank.
- Be Proactive with Lease Renewals: If you can lock in your rent before the next wave of increases, you might save hundreds over the year.
For Landlords:
- Invest in Energy Efficiency: Tenants are increasingly looking for homes with high EPC ratings.
- Adapt to Remote Work Needs: Properties with a home office or study area are in demand.
- Offer Security Where Possible: Long-term leases with fair, fixed increases can attract more stable, reliable tenants.
A Global Investment Magnet
Despite challenges, London’s rental market remains a magnet for global investors. In March 2025, Nomura Real Estate partnered with Legal & General to develop over 1,000 rental homes, showing just how attractive the city is for long-term investment.
What’s Next in Regulation?
The Renters' Rights Bill 2024, currently making its way through Parliament, could reshape the market. If passed, it will introduce:
- Stricter eviction protections
- Limits on rent hikes
- Encouragement for longer-term leases
This could offer renters more stability, though it may also impact landlord strategies and rental yields.
Final Thought: Stability or Just a Breather?
2025 may be remembered as the year London’s rental market took a breath – but it’s too early to call it a full-blown slowdown. With global interest still strong and supply playing catch-up, the pressure isn’t going away anytime soon.
Whether you're a tenant looking for space or a landlord planning your next move, staying informed is more important than ever.
Need help navigating the market? Whether you're looking to rent, buy, or invest, our team is here to help you make confident, data-backed decisions.
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