The trajectory of rental growth for newly let properties in January 2025 edged up by 1.8% year-over-year, sustaining an 18-month trend of deceleration, as outlined in the latest Hamptons Monthly Lettings Index. While rental prices are still climbing, the pace has markedly tempered compared to previous surges.

Meanwhile, tenants opting to renew their leases encountered a more substantial 6% uptick in rents, aligning their costs with prevailing market conditions. The contrast between new lets and renewals remains notable—over the past five years, rental prices for freshly let properties have soared by 34%, whereas tenants renewing their agreements have faced a comparatively milder 26.5% increase.

Landlords’ presence in the housing market has also waned. In January, purchases by landlords comprised a mere 9.6% of total home sales, a dip that pushed their share below the 10% threshold for the first time since 2009.

Regionally, London’s rental market displayed a stark divergence. Rental prices for newly let properties in the capital saw a marginal 0.7% decline, yet tenants renewing their leases experienced a significant 6.8% rise. Beyond London, the Northern regions—including the North East, North West, and Yorkshire & Humber—recorded a 3.5% rent increase, a stark contrast to the 8.4% surge observed just a year prior. Southern regions outside of London followed a similar pattern, registering a 3.1% rise, down from the 6.2% growth rate of the previous year.

Despite a 3% expansion in the number of available rental properties in January, this marked the smallest annual increase since August 2022. Even with this slight rise, rental supply remains constrained, still falling short of pre-pandemic levels. London, in particular, has been hit hard by shrinking inventory, with rental listings plummeting by 25% compared to the previous year.

Aneisha Beveridge, head of research at Hamptons, commented: “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 it has over the last few years.

“Rather, a squeeze in the number of rental homes on the market has made securing a property more competitive than it has been in recent months.”

Beveridge further elaborated: “What happens to rents on newly let homes tends to play out in the renewal market around 18 months later.

“So we expect tenants renewing their contracts to face smaller increases in 2025 than they did in 2024.

“Over the past five years, the lag between the two markets has saved sitting tenants an average of £6,641 each year, a saving which would have been wiped out had increases in renewal rents tightly tracked new lets.”

She added: “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 in the form of the Renters’ Rights Bill.

“While purchases by landlords haven’t completely dried up, it’s looking like higher stamp duty rates have reduced the share of homes sold to landlords by between 10% and 20%.”

As 2025 unfolds, the rental market finds itself at an inflection point—supply constraints, evolving legislative pressures, and shifting tenant behaviours continue to sculpt the landscape. Whether this cooling trend persists or another wave of change reshapes the market remains to be seen.