Rising Rents and Shrinking Supply

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30 Oct at 9:54 am

UK Rental Market Outlook: Record Rents Amid Tight Supply

Rental Prices Surge Nationally

The UK rental market continues to tighten in 2025, with average rents reaching record highs despite easing tenant demand. Meanwhile, in the capital the figure reached £2,736, rising by 0.9% for the quarter and 1.6% compared with the same period last year.

Supply Still Constrained

UK Rental Market Available rental stock is now 9% higher than at the same time last year. However, it remains 23% below pre-pandemic levels, showing a sharp supply contraction. New rental listings are only marginally ahead of last year (just 1% higher), the smallest uplift seen in 2025 to date. At the same time, tenant demand has cooled, down by 14% compared with last year.

UK Rental Market Pressures on Landlords

Sector Uncertainty

The report shows that one in three landlords is contemplating exiting the sector at some point in the future. Two-thirds (66%) believe the government fails to provide enough support for landlords. Meanwhile, fewer than half (43%) understand the forthcoming Renters’ Rights Bill and feel prepared for its changes.

Financial Strain

The regulatory landscape is just one factor shaping landlord behaviour. Landlords face additional pressure from higher stamp duty and possible national insurance changes in the upcoming Autumn Budget. Moreover, mortgage costs have almost doubled compared to pre–mini-Budget levels in 2022. The average interest rate on new buy-to-let mortgages now stands at 4.87% – compared with 2.93% previously. Moreover, 29% of landlords say rising mortgage rates are undermining their plans to grow portfolios, while 17% are considering shrinking their holdings.

Despite this, landlords who remain active may benefit from the supply constraints and rising rents, which can push yields higher.

Regional Strengths: Where Demand Holds

Demand in regional cities such as Manchester, Birmingham, Leeds, Liverpool, Stockport and Nottingham is described as particularly robust, driven by high employment levels, large student populations and relatively affordable entry-prices.

In the North West (Manchester, Liverpool, Stockport) the average rent is £1,241 pcm, up 5.1% annually, with yields as high as 7.4%.
In Yorkshire & Humber (Leeds) the average rent is £1,093 pcm, up 4.1% annually, with yields at around 7.2%.
In the West Midlands (Birmingham) the average rent is £1,247 pcm, rising 2.6% annually, with yields at 6.8%.
In the East Midlands (Nottingham) the average rent is £1,208 pcm, up 2.7% annually, with yields of 6.7%.

These figures compare favourably with London, where average yields are about 5.7%, and sit above the national outside-London average of 6.3%.

UK Rental Market Affordability Challenges

UK Rental Market While average earnings are rising by around 5% – outpacing the 3.1% rise in rents – many households still face stretched budgets. Renting now absorbs approximately 44% of the average wage, up from 40% five years ago. For prospective homeowners, a 20% deposit on a typical first home has increased from £40,326 to £45,374 over the same five-year period.

Looking Ahead: What the Legislation Might Bring

The Renters’ Rights Bill has gained royal assent and will introduce substantial changes to tenancy agreements and landlords’ obligations. It remains to be seen how supply will respond over the next 12–18 months as new regulations take effect. However, it is likely that rental stock will decline further, driving rents even higher.