Rising rents in the United Kingdom have reached their slowest growth rate in four years, reflecting a significant shift in tenant demand and exacerbating the financial challenges faced by landlords amid increasing regulations and tax burdens. According to the latest rental market report from property listing platform Zoopla, average UK rents rose by just 2.8% over the 12 months leading to April 2025, reaching an average monthly payment of £1,287. This growth is markedly lower than the 6.4% increase reported the previous year and lags behind the current inflation rate of 3.5%.
The slowdown is attributed primarily to reduced demand for rental properties rather than an uptick in available rentals, as stated by Richard Donnell, executive director of research at Zoopla. Demand has decreased by approximately 16% compared to last year, although it remains 60% above the levels seen before the pandemic. A critical factor in this decline is the lower migration rates for work and education, which had previously surged in the 2022/2023 period. Additionally, greater stability in mortgage rates and enhanced accessibility to financing for first-time home buyers have also contributed to the cooling demand for rental properties.
The rental market’s recent trajectory signifies that rents may be nearing an affordability ceiling, coming after a substantial post-pandemic surge fueled by a supply-demand imbalance. While landlords once benefitted from attractive yields on investment properties, their returns have been increasingly constrained by a combination of higher property taxes, regulatory changes, and legislative proposals.
Changes to the tax framework, particularly in regards to mortgage interest deductions, have had a substantial impact on landlords’ profits. Between 2017 and 2020, rules were phased in that replaced the previous system, which allowed landlords to deduct mortgage interest payments from taxable rental income, with a less favorable 20% tax credit system. This shift disproportionately affected higher-rate taxpayers who previously benefitted from greater tax relief. In addition to this, revisions to stamp duty have further heightened costs for property investors. The 5% surcharge on buyers of second homes, enacted in the Autumn Budget of 2023, marked an increase from the prior 3% rate.
Furthermore, the current Renters’ Rights Bill, advancing through the House of Lords, is poised to introduce more stringent regulations aimed at safeguarding tenant rights. This legislation includes provisions that would ban no-fault evictions and limit rent increases to once a year. While these changes are intended to protect tenants from exploitative practices by landlords, critics argue that they may hinder landlords’ ability to evict tenants for legitimate reasons, thereby contributing to an already challenging rental market.
Consequently, some landlords are choosing to exit the sector altogether, leading to a decline in the rental supply even as tenant demand continues to fluctuate. Despite the overall slowdown in annual rental growth, Zoopla anticipates a resurgence, projecting an increase in rental rates of between 3% and 4% by 2025. Certain regions have begun to see variances in rent increases; for instance, Belfast recorded a remarkable 11.5% rise in annual rents, in stark contrast to Leeds, which experienced a 1.5% decrease.
The disparities in rent growth across the UK underline a more complex regional rental landscape. Notable increases were observed in cities such as Newcastle at 6% and Cardiff at 5.1%, while areas like Sheffield and Nottingham saw marginal increases of 1.2% and 0.5%, respectively. London, despite its significant stature in the property market, posted a modest growth of just 1.5%, equating to an average rent of £2,175 per month.
In terms of rental yields, a separate analysis from Rightmove indicated that average rental yields across the UK were 6.3% in the first quarter of 2025, up 0.2% from the previous year. The highest yields were reported in the North East, achieving an average of 8.1%, while landlords in London yielded the least at 5.7%. These figures provoke a reassessment of whether buy-to-let remains a viable investment strategy.
Potential landlords must meticulously evaluate their returns, accounting for various associated costs such as mortgage payments, maintenance expenses, letting agency fees, and insurance. Additionally, periods without tenants can quickly shift the financial viability of the investment into the red. Many prospective investors might also consider alternative options, such as fixed-rate savings accounts currently yielding around 4.5%, which pose significantly lower risk and management demands.
While cash savings lack the potential for capital appreciation offered by property investments, landlords must weigh the dynamic challenges of the rental market against their capacity for hands-on property management and market navigation. As the UK rental landscape continues to evolve, both landlords and prospective renters may need to adapt to a reality that increasingly emphasizes regulatory compliance, affordability, and regional market disparities.