New figures from Propertymark, the industry body representing letting and estate agents across the UK, reveal a notable shift in rental affordability dynamics, with London and the North West emerging as standout regions where the balance between tenant income and rental costs is moving in tenants' favour. This development marks a departure from the relentless affordability squeeze that has characterised the private rented sector since 2021, and it carries significant implications for landlords, institutional investors, and policymakers grappling with the UK's chronic housing supply shortfall.
For context, the scale of the affordability crisis over the past three years has been stark. Average UK rents have risen by more than 30% since early 2021, according to ONS data, far outpacing wage growth of roughly 18% over the same period. In London specifically, average rents breached £2,000 a month in 2024 before plateauing, while tenant income-to-rent ratios in prime boroughs such as Kensington and Chelsea have regularly exceeded the 40% affordability threshold that lenders and letting agents consider sustainable. That the capital is now showing signs of genuine easing—rather than merely slower growth—suggests structural rather than cyclical change is underway.
The North West's inclusion alongside London is particularly instructive. Manchester and Liverpool have been the poster children of rental growth for half a decade, driven by build-to-rent investment, university demand, and inward migration from priced-out southern renters. Manchester rents alone climbed by an estimated 35% between 2019 and 2024, according to Hamptons research, making it one of the fastest-growing rental markets in Europe. Signs that affordability is now improving there indicate either a genuine supply response finally catching up with demand—thousands of build-to-rent units have completed in Manchester's Northern Quarter and Salford Quays over the past 18 months—or a softening in tenant demand as wage growth stalls and remote working reduces the urgency of city-centre living.
This regional divergence matters enormously for how investors should be reading the market. Birmingham and Leeds, by contrast, continue to report affordability pressures intensifying, with rent-to-income ratios still climbing as supply in both cities lags population growth and city-centre regeneration schemes remain years from delivery. Newcastle presents a more mixed picture, with affordability broadly stable but starting from a lower base, making it one of the more resilient markets for yield-focused landlords seeking to avoid affordability-driven voids. Surrey and the wider commuter belt, meanwhile, remain something of an anomaly—rents there have held firm even as affordability metrics deteriorate, propped up by high-earning professionals relocating from London who are less sensitive to percentage-of-income calculations.
For buy-to-let landlords, the Propertymark findings should prompt a recalibration of expectations for the next 6 to 12 months. Where affordability is improving, rental growth is likely to moderate further, meaning landlords in London and parts of the North West should budget for low single-digit rather than double-digit annual rent increases when renewing tenancies. This is not necessarily bad news: improved affordability reduces void periods, lowers tenant turnover, and decreases the risk of rent arrears—all factors that materially affect net yield once voids and management costs are factored in. Institutional build-to-rent investors, who have poured an estimated £5 billion annually into UK residential in recent years, will likely interpret improving affordability in core cities as validation of continued capital deployment, particularly in Manchester and inner London zones where scheme viability depends on sustained tenant demand at stable rent levels.
First-time buyers should also take note, as improving rental affordability can reduce the urgency to purchase, particularly in markets where mortgage rates remain above 4.5% for typical two-year fixed products. If renting in London becomes marginally more affordable relative to buying, some would-be purchasers may delay entry into homeownership, which in turn eases pressure on entry-level sales markets in outer London boroughs and could soften price growth in the £350,000–£500,000 bracket over the coming year. Developers focused on build-to-rent should treat this data as a green light for continued investment in the North West, while approaching Birmingham and Leeds with more caution until supply catches up with demonstrably strained affordability.
The broader conclusion is that the UK rental market is no longer moving as a single national entity but fragmenting into distinct regional cycles, each responding to different combinations of supply delivery, wage growth, and migration patterns. Investors who continue to treat the UK private rented sector as a homogeneous asset class risk mispricing regional risk substantially over the next year. The smart money will follow where affordability is genuinely improving on the back of supply—London and Manchester—while treating persistent affordability deterioration in Birmingham and Leeds as a signal of unmet demand that will eventually translate into stronger long-term rental growth once new stock arrives, likely from 2026 onwards.
