The average advertised rent of properties coming to market outside of London has fallen for the first time since 2019, dropping by 0.2% to £1,341 per calendar month.
This is according to Rightmove, which found that supply in the rental market has increased, while demand has dropped, helping push down prices.
However, rents in the capital have continued to rise, albeit slowly. Average London rents increased 0.1% over the past quarter, reaching a 13th consecutive quarterly record of £2,695 per calendar month.
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The news that rents are dropping or at least slowing will be cheered by hard-pressed renters who have faced tough competition to secure a home and then paid soaring rents over the past few years.
However, buy-to-let landlords could be worried by the figures. They already face a challenging time with tax relief restrictions, lower capital gains tax allowances, and high mortgage rates, as well as new rules like the Renters' Rights Bill.
Any landlords wanting to buy further investment properties also face a 5% stamp duty surcharge, as announced in last year’s Autumn Budget.
We delve into the Rightmove data and ask what it means for buy-to-let landlords.
Rental market cools
Rents for newly-listed homes outside London are still 4.7% higher than this time last year, but they fell 0.2% over the last quarter. It brings to an end many months of new record high rents, which rocketed during the pandemic.
Part of the reason is increased supply in the rental market. The number of available rental properties is now 13% higher than last January. Supply has increased the most in the North East, and the least in Wales, according to Rightmove.
In addition, the number of prospective tenants looking to move has dropped by 16% versus last year.
Some demand may have transitioned to the sales market, particularly first-time buyers, helped by lowering mortgage rates and higher average wages.
Estate agents report that some tenants are choosing to stay put rather than move due to costs, and while there is evidence of some buy-to-let landlords choosing to exit the market, there are also signs that other, perhaps larger, landlords are continuing to invest.
Rightmove notes that there are currently no major signs of the upcoming Renters’ Rights Bill affecting rental market dynamics.
It all means that the balance of supply and demand has improved.
Rightmove’s property expert Colleen Babcock comments: “While new tenants are still paying more than they were at this time last year, the pace of growth continues to slow.”
Alex Bloxham, head of residential lettings at the estate agent Bidwells, says the data “represents positive news for renters”, adding: “We're seeing a cooling of what has been a ferociously hot rental market over the last year, where tenants have endured intense competition and consistent rental inflation.
"These figures suggest landlords are continuing to invest in their buy-to-let portfolios while more tenants are choosing to stay put, likely due to continued macroeconomic uncertainty and the upfront costs involved in relocating.”
Where does Rightmove's rental data leave landlords?
While average rents have dipped slightly, property experts say the rental market remains buoyant, and in some areas it’s “very hot”.
Demand is robust: the average number of applications per rental property stands at 10 - double the pre-pandemic average - according to Rightmove.
The property website says the amount of new properties coming into the rental market is stable compared with last year, suggesting neither a sudden influx of newly advertised properties, nor a mass exodus of landlords.
Babcock says that “agents on the ground still tell us that the market is very hot, and some areas have improved more than others when it comes to the supply and demand balance”.
John Baybut, managing director at Berkeley Shaw Real Estate in Liverpool, comments: “Demand is generally pretty strong and the market is still busier than before the pandemic. Tenants are paying very high rents, so with more supply on the market now, some are being more ‘choosey’. Some have also decided the costs of moving are too expensive and have decided to stay put.”
Baybut’s advice for landlords is to be careful to price accurately. That means looking closely at current market rents, as well as their own affordability pressures like their mortgage rate.
He says: “Landlords need to work closely with experts to set the right price and keep their home occupied in the current market, reducing the risk of void periods.”
Landlords that have chosen to continue investing in the property market do potentially have two things to look forward to this year: cheaper mortgage deals, and higher house prices.
Buy-to-let mortgage rates have increased in recent months - the average two-year fix is currently 5.42%, according to Moneyfacts, compared to 5.34% at the end of 2024 - but are predicted to fall this year.
The Bank of England is forecast to cut interest rates twice this year, which should push mortgage prices downwards.
Meanwhile, property prices are expected to grow by as much as 4% this year, which could increase a buy-to-let investor’s return when they come to sell a rental property.
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