The UK rental market is experiencing a shift, with the pace of rent increases for new tenancies slowing significantly. According to data from Hamptons, the average monthly rent rose by just 1.8% in January compared to the previous year—the smallest increase recorded since October 2020. This marks 18 months of continued easing in rent growth.

A Changing Rental Landscape

For those signing new leases, the typical monthly cost now stands at £1,372. However, renters who choose to extend existing tenancy agreements are facing more substantial hikes, with rents surging by 6% over the past 12 months. Despite this increase, renewed tenancies remain more affordable, averaging £1,263—£109 less than rents for new tenants.

Hamptons notes that landlords are adjusting rents to align with market rates rather than offering lower increases for long-term tenants.

Rent Growth Reaching Its Limit?

Aneisha Beveridge, Head of Research at Hamptons, suggests that the national rental market may have reached its peak in terms of growth.

“The pace of rental growth nationally has likely bottomed out. There are some signs that growth outside London is slowly picking up again, but we’re unlikely to see it run at the same rate as in previous years,” she explained.

She also pointed to a tighter supply of rental properties, making competition among tenants fiercer than in recent months. Additionally, Beveridge noted that trends in new tenancies typically influence the renewal market about 18 months later, meaning tenants renewing leases in 2025 could see smaller increases compared to 2024.

Regional Variations in Rental Trends

Over the past five years, rental costs for new tenancies have soared by 34%, outpacing the 26.5% rise seen by tenants who have remained in place.

London, however, presents an interesting contrast. While new tenancy rents in the capital dipped by 0.7% year-on-year—the second consecutive monthly decline—renewal rents rose sharply by 6.8%.

Across the North East, North West, and Yorkshire and Humber, rents increased by 3.5%, a noticeable drop from the 8.4% rise seen a year earlier. Meanwhile, the South East, South West, and East of England followed a similar trend, with rental costs increasing by 3.1%, down from 6.2% last year, helping to narrow the north-south rental price gap.

Supply and Landlord Activity at Historic Lows

Hamptons’ Letting Index also highlights shifting supply dynamics within the rental sector. Nationwide, rental stock increased by 3% compared to January 2024, marking the smallest annual rise since August 2022. However, London saw a stark 25% decline in available rental properties, which is expected to drive rents higher in the coming months.

Overall, the number of rental properties on the market remains 39% lower than in January 2019, with London facing an even steeper shortfall of 48%.

Additionally, landlord purchases have hit historic lows. Just 9.6% of home sales in January 2025 were made by landlords—the first time this share has fallen to single digits since records began in 2009. In London, landlord purchases accounted for only 7% of home sales, while Scotland saw a mere 4.6%, following an increase in stamp duty from 6% to 8% in December 2024.

Policy and Market Implications

Beveridge attributes the decline in landlord activity to rising stamp duty rates and upcoming regulatory changes, such as the Renters’ Rights Bill.

“New purchases by landlords have been depressed by increases in stamp duty rates towards the end of last year and the prospect of tighter regulation. While purchases haven’t completely dried up, it looks like higher stamp duty rates have reduced the share of homes sold to landlords by between 10% and 20%,” she explained.

As rental stock remains limited and competition among tenants intensifies, experts suggest that affordability pressures could persist despite the slowing pace of rent increases for new leases. The next year will be crucial in determining how regulatory changes and supply constraints shape the future of the UK rental market.