As we start 2025, the lettings industry is entering a phase marked by stabilisation and opportunity. Rental inflation has slowed to an average of 3-4% for new lets, reflecting the effects of affordability constraints; renters’ budgets are beginning to limit how much rents can rise.
Despite this moderation, high demand persists, especially in regions with limited rental stock, positioning landlords with well-maintained properties to benefit from stable rental yields.
Supply remains constrained, with data showing that around 12% of current property sales are from landlord disposals, yet this is a controlled exit, not a mass exodus. Many landlords are seizing the chance to adapt, whether by modernising properties to meet growing tenant interest in energy-efficient homes or adjusting portfolios in line with potential new energy regulations.
This gradual shift aligns with tenants’ increasing prioritisation of sustainable housing, setting up an environment where landlords who invest strategically may gain a competitive edge.
Mortgage rates, which now stabilise in the low 4% range, have shown signs of easing affordability pressures on homebuyers. As a result, there may be a gradual uplift in first-time buyer numbers, potentially softening rental demand in the long term. However, the Private Rented Sector (PRS) remains indispensable, providing accessible housing for those not yet ready to buy and ensuring continued demand for rental properties across the UK.
The anticipated Renters’ Rights Bill (RRB) introduces an element of uncertainty for the coming year, but its impact will likely unfold progressively as its specifics become clearer. Meanwhile, energy performance standards are a focus for many landlords, with the possibility of requiring EPC ratings of ‘C’ or above. Although these changes are not due to come into effect until 2030, landlords will be considering how these changes affect their plans over the interim period. While these changes are intended to improve housing standards, we do need to consider the impact they could have on the sector over the long term.
Zoopla has made its prediction for the lettings market in 2025.
It says that while the number of homes available to rent is now 12 per cent higher than this time last year, Zoopla doesn’t expect any big increase in the number of homes for rent over 2025.
The number of homes for rent remains below pre-pandemic levels in all regions apart from the East Midlands.
Private landlords continue to sell off rented homes at a steady pace in the face of greater regulation and higher borrowing costs, despite what have been sizable increases in rents.
Despite this, Zoopla believes that the peak of the private landlord sell-off has now passed.
It’s now a question of when market conditions look right for landlords to increase investment and expand rental supply. This is still some way off and requires lower base rates and higher rental yields.
The portal suggests that one bright spot has been more corporate investment in Build To Rent homes – but even in these instances, the pace of new development has slowed in the face of higher borrowing costs and more regulation.
Zoopla expects a continued mismatch between supply and demand with average rents for new lets to increase by four per cent over 2025 taking the annual rental cost to £15,850.
Rental growth in London and larger cities will lag behind the UK average as a result of growing affordability pressures and further modest growth in supply.
The portal’s latest market snapshot says landlords continue to sell off rented homes “at a steady pace” in the face of greater regulation and higher borrowing costs, despite what have been sizable increases in rents.
Despite this, Zoopla believes that the peak of the private landlord sell-off has now passed. It’s now a question of when market conditions look right for landlords to increase investment and expand rental supply.
This is still some way off and requires lower base rates and higher rental yields, Zoopla claims.
It says the one bright spot has been more corporate investment in Build To Rent homes – but even in these instances, the pace of new development has slowed in the face of higher borrowing costs and more regulation.
Zoopla expects a continued mismatch between supply and demand with average rents for new lets to increase by four per cent over 2025 taking the annual rental cost to £15,850.
Rental growth in London and larger cities will lag behind the UK average as a result of growing affordability pressures and further modest growth in supply.
It adds that on average, rents for newly let properties are now 3.9% higher than a year ago but with pockets of fast-rising rents remaining. Annual rental inflation stood at 10.5% in Northern Ireland compared with 1.3% in London.
In towns and cities, average rents are rising fastest in Rochdale (up 11.9% in a year) and Blackburn (up 10%), and Birkenhead (up 9%). Zoopla says renters are seeking areas in and around major cities.
There’s no doubt that 2025 will bring its share of challenges (we’re used to it), but with those challenges come opportunities. Rising yields, ongoing tenant demand, and a chance to modernise your approach all point to a brighter future for professional landlords who embrace change.
Staying in the game requires resilience, adaptability, and a willingness to engage with the evolving landscape. Whether it’s navigating legal reforms, managing rising costs, or advocating for landlord rights, those who rise to the occasion will be well-positioned to reap the rewards.