Lettings Index March 2025

Rental market conditions are steadily improving after 3 years of undersupply and excessive demand. There still continues to remain a mismatch in supply and demand, which is not going to rebalance anytime soon, meaning a continued upward pressure on rents. Although, there are signs rent rises are slowing, only 3% increase, the lowest level for 3.5 years. However, this has more to do with worsening rental affordability than an improvement in the supply of homes for rent.

• The supply and demand balance is narrowing, with 11% more homes available for rent, while rental demand is now 17% lower than it was a year ago.

Data from the Office for National Statistics reveals living costs for private renters rose faster than any other group in 2024.

The average letting agent now has 13 homes for rent. This has risen from a low of 10 in 2023 but is still 22% below the pre-pandemic average.

The private rental market needs more supply to boost choice and to help renters on lower-to-middle incomes who have struggled to keep pace with the 24% increase in rents for new lets seen over the last 3 years.

• The rental market needs more supply, but rental reforms and other proposed policy changes will limit new investment and supply growth

Renters Rights Bill

The private rental market in England is facing some major policy changes, which are likely to limit new investment and growth in the stock of rented homes over the next few years.

This follows on from tax changes and higher mortgage rates, which have caused many landlords to exit, keeping rental stock levels static at around 5.5m since 2016.

The new Renters’ Rights Bill is likely to come into force in late 2025, resetting the relationship between renters and landlords, but also increasing the complexity and cost of being a landlord. Investment in new supply will be lower as landlords assess the impact.

EPC - Energy Performance Certificate

The key headline from the consultation is the uplifting of current minimum energy efficiency standards, from Energy Performance Certificate (EPC) rating E, to EPC Rating C. The proposed date in which domestic landlords will need to achieve this by is 2030.

This proposal will expect to uplift half of private rented homes in England to a new EPC standard, whilst also saving tenants £240 per year (on average) on their energy bills. 16% of private rented homes are currently ‘E’, ‘F’ or ‘G’ rated, which means they could be more at risk of being lost from the rental market, eroding available supply.

Our forecast is to see rent rises level off my the end of the year, especially if we see a small cut in interest rates.