Housing Market Steadies as Landlords Brace for Fresh Rent Surge

The latest sentiment survey from UK property professionals points to a housing market finding its footing after eighteen months of turbulence, even as expectations for rental growth accelerate sharply in the opposite direction. Surveyors report that buyer enquiries, new instructions and agreed sales have all levelled off in recent weeks, suggesting the sharp swings seen since the 2022 mini-Budget are finally giving way to something more predictable. Yet in the same breath, respondents are forecasting a fresh upward push in rents over the next twelve months, driven by a chronic shortage of stock rather than any renewed strength in tenant demand. This divergence — a calming sales market alongside an overheating rental one — is the defining feature of the UK property landscape heading into 2025, and it carries very different implications depending on which side of the market an investor sits.

For sales, stabilisation matters enormously because it removes the paralysis that has gripped buyers and sellers alike since mortgage rates roughly trebled from their 2021 lows. With swap rates now settled and the Bank of England's base rate widely expected to ease further from its current 4.75% level over the coming year, lenders have begun repricing fixed deals more competitively, with best-buy five-year fixes edging below 4.2% in recent weeks. That has been enough to coax cautious buyers back into the market without igniting a fresh price boom. Nationwide and Halifax data both point to annual price growth in the low single digits — around 2% to 3% — a pace that looks sustainable rather than speculative. Crucially, this stability is not uniform across the country. Manchester and Leeds continue to outperform, with transaction volumes up on last year as buyers chase relative affordability and strong rental yields, while London's higher-value boroughs remain sluggish under the weight of stamp duty costs and stretched affordability ratios that have pushed loan-to-income multiples to their limits.

The rental side of the story is far less benign. Survey respondents are now pointing to rent expectations accelerating again after a brief pause earlier this year, with some forecasts suggesting UK-wide rental growth could return to the 5-7% range annually — a rate that would once again outstrip wage growth and intensify the affordability crisis facing tenants. The root cause is structural rather than cyclical: landlord instructions have fallen steadily as buy-to-let investors exit the sector in the face of higher borrowing costs, tighter regulation and the looming Renters' Rights Bill, which will abolish Section 21 evictions and reshape tenancy law. Zoopla estimates the number of rental properties available to let has fallen by roughly a fifth compared with pre-pandemic levels in several major cities, and that scarcity is now the single biggest driver of rent inflation. Newcastle, Liverpool and parts of Birmingham — markets that traditionally offered landlords the strongest yields — are seeing some of the sharpest rent increases precisely because supply has contracted fastest there, even as sales prices in those cities remain comparatively affordable.

For buy-to-let landlords, this bifurcated market presents a genuine strategic dilemma. Those who remain in the sector are being handed pricing power they have not enjoyed in years, with void periods shortening and rental yields in northern cities pushing towards 7% gross in some postcodes. But the regulatory backdrop is becoming steadily less hospitable, and the calculus of remortgaging onto a rate that may still sit above 5% for many landlords coming off older fixed deals means net returns are being squeezed even as headline rents rise. Portfolio landlords with lower loan-to-value ratios are best placed to capitalise, while highly leveraged accidental landlords are increasingly the ones selling up — which itself feeds back into the shrinking rental supply that is pushing rents higher still. This is a self-reinforcing cycle that policymakers have so far struggled to address.

First-time buyers, meanwhile, are the unambiguous beneficiaries of a stabilising sales market, provided they can clear the deposit hurdle. With price growth muted and mortgage rates drifting down from their 2023 peaks, affordability metrics are improving marginally for the first time in three years. Regional cities such as Leeds and Liverpool, where average first-time buyer prices remain well under £200,000, offer a considerably easier entry point than Surrey or the South East, where average property values above £450,000 keep deposit requirements firmly out of reach for many. Developers are responding to this geographic divide by concentrating build-to-rent and shared ownership schemes in the North and Midlands, where demand is strongest relative to supply, while London-focused developers increasingly pivot towards purpose-built rental stock rather than for-sale units, chasing the yield premium that scarcity has created.

Looking ahead to the next six to twelve months, the most likely trajectory is one of continued sales market stability alongside further rental inflation, unless government intervenes decisively on supply. Any additional Bank of England rate cuts will support transaction volumes and could nudge price growth up modestly into the 3-4% range by mid-2025, but they will do little to solve the rental shortage, which is a function of landlord exits and planning constraints rather than borrowing costs alone. Commercial investors eyeing the private rented sector — particularly institutional build-to-rent operators — are best positioned to benefit from this environment, given their ability to scale supply in a way that individual landlords increasingly cannot. For everyone else, the message is clear: the sales market is normalising, but the rental crisis is entering a new and more acute phase.