As we move into 2025, the London rental market is undergoing significant shifts, shaped by economic factors, policy changes, and market dynamics. For HR teams, global mobility professionals, and employees relocating to London for work, understanding these developments is essential for making informed housing and relocation decisions.This analysis provides a detailed outlook on London’s lettings market, highlighting current trends and future projections to assist those managing work-related relocations in the UK capital.
Current London Rental Market Status
After years of double-digit rent increases, the London rental market is beginning to stabilise. Rightmove reports average advertised rents hit £2,652 per month in 2024, reflecting a 4% year-on-year increase—one of the smallest since the pandemic.
Demand remains high, with rental properties attracting over 17 enquiries per listing on average—more than triple pre-pandemic levels. Zoopla notes a 30% decline in the number of available rental properties compared to 2019, exacerbating competition. This imbalance presents challenges for relocating employees unfamiliar with the fast-moving market.
Economic Factors Influencing the Market
The Bank of England projects inflation to stabilise around 2% by mid-2025, potentially easing pressure on rental prices. However, interest rates are expected to remain relatively high, around 4.5%, continuing to impact landlords’ mortgage costs and, consequently, rental prices.
Future London Rental Market Projections
While rent growth is expected to slow, prices will continue to rise in 2025 due to limited supply and robust demand in the London rental market. Key forecasts include:
- Rentd: A 7% increase in average rents, with outer boroughs such as Kingston upon Thames seeing sharp rises.
- JLL Residential: Predicts rental growth of 2.5% in 2025, with an average of 3.5% from 2025–2029.
- Savills: Predicts rental growth of 2.5% in London in 2025 and a 6% UK-wide rent increase, driven by demand outpacing supply in urban areas.
Rising interest rates and regulatory changes may deter new buy-to-let investors, exacerbating the supply crunch. In contrast, demand for mid-range rental properties is expected to grow as affordability constraints push renters away from high-cost areas.
Impact of Remote Work on the London Rental Market
The prevalence of hybrid work models is reshaping rental preferences. Demand for properties with home office spaces has increased by 25% since 2020, according to Rightmove. This trend is expected to continue, potentially boosting demand in outer London boroughs offering larger living spaces.
Impact of Policy Changes: Autumn Budget 2024
The Autumn Budget introduced several measures affecting London’s lettings market:
- Stamp Duty Surcharge Increase: The surcharge on second homes rose from 3% to 5%, potentially discouraging smaller buy-to-let investors.
- Abolition of Non-Domiciled Tax Status: From April 2025, the removal of non-dom tax status could dampen demand for high-end rental properties, potentially easing competition in prime areas.
- Lower Stamp Duty Thresholds: Reversion to pre-pandemic levels in April 2025 may affect landlords seeking to expand portfolios, limiting new rental stock.
These policies favour larger institutional landlords over smaller-scale investors. As larger institutional landlords take up a bigger share of the market, rental prices may rise because they have more control over pricing. Smaller landlords, who often offer more flexibility in rent negotiations, may be pushed out.
Additionally, tenant choice could decrease as institutional landlords typically offer standardised properties, reducing the variety available. This shift could result in fewer options for tenants, particularly in areas where small landlords have historically provided more diverse housing options.
Energy Efficiency Regulations in the London Rental Market
From 2025, all newly rented properties must have an Energy Performance Certificate (EPC) rating of C or above. This regulation is expected to impact approximately 60% of London’s rental stock, potentially leading to rent increases as landlords pass on renovation costs to tenants.
Affordability Metrics for the London Rental Market
The Office for National Statistics projects that Londoners will spend an average of 40% of their income on rent in 2025, up from 37% in 2023. This increase in the rent-to-income ratio may push more renters towards shared accommodation or outer boroughs.
International Demand in the the London Rental Market
Despite Brexit and changes to student visa regulations, London is expected to maintain its appeal to international renters. Universities UK forecasts a 20% increase in international student numbers by 2025, potentially boosting demand for rental properties near major institutions.
London Rental Market Borough-Specific Insights
Barking and Dagenham
Known for its affordability, Barking and Dagenham remains attractive for families and first-time renters. Rental prices here are expected to grow moderately in 2025, likely around 3-4%, as demand increases from those priced out of more central locations.
Brixton
A cultural hotspot, Brixton offers diverse housing options. Demand for rentals is predicted to remain high in 2025 due to its vibrant atmosphere and strong transport links, pushing rents up by an estimated 5-6%.
Camden
Popular for its eclectic lifestyle and proximity to Central London, Camden continues to see robust demand. Rental growth is projected at around 4-5% in 2025.
Canary Wharf
This financial hub combines high-rise living with waterfront views. Rents are predicted to increase by 6-7% in 2025 due to demand from professionals and a shortage of new stock.
Chiswick
Known for its village-like charm and family-friendly amenities, Chiswick is expected to see a 4-5% rise in rents in 2025 due to strong demand from both families and professionals seeking suburban tranquillity with good transport connections.
Greenwich
A historic area with excellent transport links via the DLR, Greenwich continues attracting renters looking for a balance between city access and green spaces. Rents are forecasted to grow by approximately 5% in 2025.
Hampstead
A prime location known for its luxury housing and green spaces, Hampstead is expected to see steady rental growth of around 5% in 2025 as high-net-worth renters seek prestige and exclusivity.
Haringey
Haringey’s mix of affordability and connectivity appeals to young professionals. In 2025 rents are predicted to rise by 4-5% due to its evolving amenities and increasing popularity.
Islington
A trendy hub with strong appeal among professionals, Islington’s rental market is anticipated to grow by 4-6% in 2025, driven by its proximity to the City of London and vibrant social scene.
Kensington
A premium area with a global reputation, Kensington’s rental market is expected to grow by 6-7% in 2025, driven by sustained demand for luxury properties despite affordability concerns.
Kingston upon Thames
Kingston offers a mix of suburban tranquillity and excellent amenities. Rents here are projected to rise by 5-6% in 2025 as it remains a popular choice for families and professionals.
Richmond upon Thames
This affluent borough continues attracting renters seeking proximity to nature and top-tier schools. Rental prices are forecasted to grow by 5-7% in 2025, reflecting strong demand and limited supply.
Soho
Central London’s entertainment heart, Soho remains highly desirable for younger professionals and expats. Rent increases of 5-6% are expected in 2025, fuelledd by limited availability and sustained demand for proximity to nightlife and work.
Sutton
An affordable option for families and commuters, Sutton is expected to see rental growth of 4-5% in 2025, bolstered by its quality schools and transport links.
Final Thoughts on the London Rental Market for 2025
London’s lettings market in 2025 presents a complex picture of challenges and opportunities. While rents are projected to rise further, stabilisation in some areas offers relief from the rapid increases seen in previous years. Outer boroughs are becoming increasingly attractive due to affordability constraints in central locations.
For tenants, preparation is key. Securing long-term agreements, acting swiftly in competitive markets, and exploring outer boroughs can help mitigate rising costs. Landlords must adapt to evolving policy frameworks, energy efficiency requirements, and shifting demand patterns to maximise returns.
Global mobility professionals should stay attuned to these market dynamics, considering factors such as remote work preferences, energy efficiency ratings, and the impact of technology on the rental process when advising relocating employees.
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