Expensive Rents Almost Out of Reach for Tenants

Property professionals are warning rents in London have reached the point where they are too expensive for tenants - and the problem will soon spread to the rest of the country.

The number of rented homes sold by landlords is outstripping those available to rent while letting professionals forecast the trend will continue into 2025 and beyond.

Unrelenting compliance and financial stress from the government will likely lead to more landlords selling, with few likely to enter the market or expand their portfolios.

Data from letting agent Hamptons shows that buy-to-let investors have sold 1.53 million rented properties since 2016 and replaced them with 1.22 million, leaving 310,000 fewer homes to rent.

The homes-to-rent black hole has been partly filled with 106,000 build-to-rent properties, pushing the number of homes to rent nationally to the lowest level since 2019.

Fewer homes to rent

Letting agent trade body, the Royal Institution of Chartered Surveyors (RICS), has repeatedly cautioned that landlords offer fewer properties to rent.

Buy-to-let rents grew nationally by 4.3 per cent in the year to September and 1.7 per cent in London, which is around half the year-earlier rate but double that of general inflation.

Guy Whittaker, associate director of build-to-rent research for property consultants Savills, said: “High demand and low supply has been the influence behind the significant rental growth seen over the past few years. At a national level, this pattern looks set to continue into 2025, with rents expected to rise above incomes again. There are signs in some markets, especially London, that affordability constraints are starting to outweigh the supply and demand imbalance.

“We have already seen affordability's drag effect in recent months. Households in the capital have, on average, spent two-fifths of their gross income on rent over the past decade, but this rose during 2023 to a peak of close to 43 per cent.

“While Londoners are accustomed to spending more of their hard-earned cash on rent, there comes a point where they can’t or won’t spend any more. This inflexion point appears to have been reached, with slower rental growth through 2024 leading to slightly easing affordability pressures. We expect this trend to continue in the near term with rental growth of 2.5 per cent in London in 2025, against income growth of 2.9 per cent.”

Londoners spend 42% of income on rent

The Savills data also reveals that Londoners spend 42 per cent of household income on rent, while affordability is less stretched outside the capital, where the average household spends 33 per cent of income on rent.

UK rental growth forecast 2025-2029

Source: Savills