As the Renters’ Rights Bill continues to progress through the House of Lords, many buy-to-let investors are re-evaluating the landscape. Here, Investec Private Banker Louise North explores the outlook for the rental market with Aneisha Beveridge, Head of Residential Research for prime estate agent Hamptons.
£2,283 per month
17%
25%
1. How have rent prices changed over time in Greater London?
Aneisha: Over the past five years, rents for newly let homes in London have risen by 34%, and rents of renewed tenancies have increased by 27%.
The average rent for a newly let property in London in May 2025 was £2,283 per calendar month, which was 0.5% less than in the same month last year. While rents in Inner London fell on average (-1.6%), rents in Outer London boroughs rose 0.7%
2. What is the forecast for rental growth in future?
Aneisha: Hamptons’ forecasts that rents in Great Britain will rise by 4.5% in 2025, followed by 4% annual growth in both 2026 and 2027. This means that over the four-year period from 2024 to 2027, rents across Great Britain are projected to increase by 17%, outpacing inflation and house price growth.
This increase is likely to reflect the costs and risks incurred by landlords in the future.
House prices in Great Britain are forecast to rise by 3.0% in 2025, 3.5% in 2026, and 2.5% in 2027. However, we expect London to outperform over this period.
3. What is the current level of demand for a rental property in London and the South East?
Aneisha: Rental stock in London remains 25% down year-on-year, which means there is a need for high-quality rental properties.
That said, tenant demand has shifted quite noticeably this year. Tenant registrations are down 17% year-on-year across Great Britain, and demand is now 28% below 2019 levels.
There are currently more first-time buyer registrations than tenants in London. This is partly due to improved mortgage affordability, which has made buying more attractive for those with sufficient deposits, especially in more affluent areas.
4. What yield could a landlord expect when purchasing a property in 2025?
Aneisha: While every case is different, for landlords considering a purchase in 2025, the average gross yield in London is currently 5.7%. The South East offers a slightly higher average yield at 6.5%, while the national average stands at 7.1%. These figures are based on average house price and average rent forecasts.
With interest rates expected to continue falling, the returns on buy-to-let investments may once again start to look appealing.
5. Is there any sense that supply will weaken following the Renters’ Rights Bill?
Aneisha: The number of landlords selling properties already exceeds those entering the market, and the demands of the Renters’ Rights Bill could exacerbate the supply shortage and push up rents in the medium term.
Landlords tell us they are cautious about proposals to extend eviction timelines and provide longer notice periods.
6. How is the interest rate outlook affecting the rental market?
Aneisha: This year, lower mortgage rates have eased some of the pressure on landlords. However, it’s also impacted demand in the rental sector. Rate cuts have made buying more cost-effective than renting for many. The Bank of England’s base rate is expected to settle around 3.75% by the end of 2025.
7. What other trends should property investors be aware of?
Aneisha: London-based investors are increasingly looking outside the capital for higher yields.
Additionally, the number of limited companies set up to hold buy-to-let property has reached record levels, with over 400,000 companies currently registered. A limited company (such as a Special Purpose Vehicle) is subject to different tax treatments than an individual.
Investec Private Banker Louise North supports many clients who have used a buy-to-let mortgage to purchase or refinance a rental property. She explains: “In addition to property entrepreneurs who derive their main income from residential or mixed-use portfolios, we have clients who earn additional income from buy-to-let. This includes those who have a second home they don’t want to sell and clients who want to diversify their wealth. These clients need to cover their costs, so in a climate of changing regulation, they’re prioritising finding reliable tenants and working with managing agents to do so.
That said, many regard property as an investment asset that is likely to appreciate in value over time. Therefore, they remain committed to a long-term buy-to-let strategy and are not looking to exit the market.
At Investec, we’re here to help clients respond to challenges and opportunities. This includes looking beyond rental income at their overall financial profile when tailoring mortgages and other services.”
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Our Private Bankers are highly experienced with a history in complex lending and relationship management.
Important information:
This content is for general information purposes only and should not be used or relied upon as professional advice. It is advisable to contact a professional adviser if you need financial advice. This article contains statements and statistics from third parties who may not be regulated by financial services regulators. The opinions featured are not those of Investec and Investec Bank plc has not have verified this content.
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