The UK rental market has begun to stabilise after a record-breaking year, with rents falling for the fifth consecutive month in December 2024. According to the latest Goodlord Rental Index, average rents across England dropped 1.7% month-on-month, aligning with seasonal trends and reflecting reduced demand during the festive period. However, rents remain 3.3% higher year-on-year, signalling ongoing growth despite recent cooling.

Key Findings from December 2024

  • Average Rents:
    December’s average rent stood at £1,185, up from £1,147 in December 2023 but significantly lower than the summer peak of £1,470 in July 2024.

    • Regional Highlights:
      • South East: Largest annual growth (+5.7%).
      • North East: Smallest annual rise (+2%).
  • Voids:
    Average void periods held steady at 21 days compared to November but slightly increased from 20 days in December 2023.

    • Notable Changes:
      • Greater London: No change (18 days).
      • West Midlands: Voids improved, dropping from 24 days in November to 18 days in December.

Market Trends and Analysis

  • Summer Peaks vs. December Cooling:
    The rental market experienced sharp growth in summer 2024, with rents tracking 10% higher year-on-year in August. The subsequent cooling reflects a move toward balance, as the year concluded with more subdued activity.
  • Seasonal Patterns:
    The December decline is consistent with historical trends, as demand typically wanes during the holiday season.

Looking Ahead: 2025 Outlook

  1. Legislative Impacts:
    The forthcoming Renters’ Rights Bill, which includes banning bidding wars and enforcing stricter landlord compliance requirements, may drive changes in rent pricing and landlord operations.

    • Potential Outcome: Higher asking prices as landlords adapt to new regulations.
  2. Supply-Demand Imbalance:
    Demand for rental properties continues to outstrip supply, a trend expected to persist into 2025. This imbalance may sustain upward pressure on rents despite the current cooling.
  3. Landlord Costs:
    Increasing compliance costs and market adjustments could lead to landlords passing additional expenses on to tenants, further shaping rental dynamics.

Expert Commentary

William Reeve, CEO of Goodlord, described the December rental market as “the calm before the storm.” While 2024 was marked by significant fluctuations, Reeve anticipates further upheaval in 2025 due to legislative shifts and continued supply-demand imbalances.

“Staying informed and proactive will be key for landlords to navigate these challenges,” said Reeve. “Preparing for new regulations and market changes is essential to maximising investment potential.”

Takeaways for Landlords

  • Adapt to Legislation: Prepare for compliance with the Renters’ Rights Bill to remain competitive and avoid penalties.
  • Focus on Market Trends: Monitor supply-demand dynamics and adjust pricing strategies accordingly.
  • Plan for the Long Term: Use periods of market cooling to upgrade properties, invest in energy efficiency, or explore smart home technologies like EV charging to attract tenants.

The rental market’s stabilisation offers landlords a crucial window to prepare for the changes and opportunities 2025 is set to bring.