Residential lettings

Tenant demand in the private rented sector has been unprecedentedly high over the last four years due to a combination of factors.

Rising migration levels and high numbers of international students have placed unusually high levels of demand on the sector while strong house price growth and rising mortgage rates have created further barriers to home ownership, leaving would-be buyers staying in the rented sector for perhaps longer than they would otherwise like to.

Looking ahead to 2025 however we expect demand to soften marginally. New legislation in early 2024 placed tighter restrictions on migration and international students coming to the UK and there is early evidence that both levels have begun to ease. And with average earnings growing faster than house prices for around the last 12 months and interest rates expected to continue their downward trend, we believe some renters will now be in better positions to move into the owner-occupied sector.

On the supply side though we do not expect much change in the overall total supply of units. The anticipated Renters’ Rights Bill, while mainly beneficial for tenants, could have serious unintended consequences for available stock in the UK’s private rented sector. The abolition of Section 21 notices, the introduction of periodic tenancies, the right to request to keep pets, the increased difficulty in raising rents and the potential for legal challenges as a result, could all place additional burdens on landlords.

These new regulations (as well as the additional 2% increase in stamp duty on buy-to-let properties introduced in October 2024) may not only discourage landlords from entering the sector in the first place, but may also push those who do own properties to sell up.

With fewer landlords entering the sector and others leaving, the available supply of properties is unlikely to change with any degree of impact. Although we do expect the level of tenant demand to ease a little in 2025, with little to no change in the supply problem, tenants will still face competition for properties and growing rents.