House price growth in London witnesses a slowdown as rental prices persistently rise.
*UK Rental Market and House Prices: A Snapshot***
The Current Landscape
London, once a powerhouse of house price growth, saw a mere 0.8% increase in average house prices in the year to April 2025, settling around £560,000. In stark contrast, average rents surged 8.4% during the same period, eclipsing the national average [1].
Across the UK, average house prices soared by 6.7% to £296,000 in England during the same period, as revealed by data from the Office for National Statistics (ONS) [1]. The escalating housing prices, along with challenging mortgage rates, have driven up demand for rented homes and, in turn, rental inflation [2].
Rental Inflation: A Closer Look
Rentals continue to outpace house price inflation across the UK. As mortgage rates stabilize and migration slows, the rate of rental inflation is starting to decelerate [2]. Regions like the North East saw rental growth of 9.4%, but they couldn't beat London's average rent of £2,246 [1].
Conversely, the North East boasts the least expensive average rent at £728 in April [1]. Nathan Emerson, CEO of Propertymark, points out an issue where demand continues to surge, with around ten applicants for every property available to rent [1]. This overaged demand necessitates a rise in supply to maintain market balance.
Investment Opportunities
Supply is projected to increase from professional property investors rather than private landlords, considering the diminishing advantages of being a small-scale landlord [2]. Swap rates, directly linked to mortgage rates, have experienced an upward trend, but the Bank of England's consumer-friendly approach might allow for more affordable mortgage products to become available, bolstering consumer confidence [3].
Inflation and Mortgage Rates
Inflation spiked to 3.5% in April, surpassing forecasts and increasing concerns about future interest rate adjustments [3]. However, Mark Harris, chief executive of mortgage broker SPF Private Clients, remains optimistic that affordable mortgage products will enter the market [3].
Enrichment Data:
Current Trends in UK Rental Inflation and House Prices
Overview
- Rental Inflation: Private renter households experienced an annual inflation rate of 3.6% in March 2025, with rental costs contributing substantially to this rate.
- House Price Growth: Overall economic context suggests that house prices are influenced by factors like rental inflation and broader economic conditions.
Regional Trends
London
- Rental Market: London's average rent increased slightly but remains a record high at £2,698 per month. The city's rents are 2.0% cheaper than a year ago, indicating a cooling market.
Other Regions
- Rental Market: Outside London, average asking rents reached a record £1,349 per month, with a small 0.6% increase from the previous quarter. The supply of rental homes has increased by 18% year-on-year.
Key Observations
- Rental Inflation: The increase in rental costs is a significant factor in inflation for renters.
- Supply and Demand: An increase in rental supply and a slight decrease in tenant demand are affecting the rental market's dynamics.
- House Price Growth: House prices are often influenced by broader economic factors, including rental trends and interest rates.
- With the rise in rental inflation across the UK, investors in the real-estate sector might find opportunities in the property market, as professional property investors are expected to increase supply to meet the growing demand.
- Understanding the current trends in the UK rental market and house prices is crucial for those in the field of finance, as rental inflation continues to outpace house price inflation, influencing overall economic conditions.
- The housing-market in the UK, particularly in regions like London, is affected by factors such as mortgage rates, rental inflation, and broader economic conditions, making it vital for potential homebuyers to remain informed about these trends.
