Prime rental growth subdued as markets readjust to ‘new normal’
Prime rental growth steadied across the UK over the last three months of 2024, as the market continued to fall back in line with pre-pandemic seasonal trends.
| Q4 2024 | Annual growth | |
| All prime London | -0.1% | 1.5% |
| All prime regional | -0.9% | 1.1% |
Source: Savills prime London and prime regional lettings indices, Q4 2024
Values remained flat on the quarter (-0.1%) across the prime London rental market, while annual growth stood at 1.5% – significantly lower than the average for the past two years.
Outside of London, prime regional rental markets experienced their weakest quarter since before the pandemic (September 2018). Here values fell by -0.9% in Q4, taking annual growth to just 1.1%.
“Prime rental markets continued to feel the impact of a rebalancing back towards seasonal trends and are now experiencing a more ‘normal’ rate of growth, following three years of strong increases,” says 
, research analyst at Savills.
“Modest growth in some areas was primarily underpinned by a lack of supply and strong demand. Looking forward, we expect increased regulation from the upcoming Renters Rights Bill and additional stamp duty for second homeowners to continue to limit supply, resulting in further upward pressure on rents in some locations.
“In prime central London, however, we anticipate some increased supply from former ‘non-doms’ properties entering the rental market. In the short term, this may temper the underlying effect of constrained supply.”
Needs-based stock outperforms
Across all prime locations, smaller and lower-value prime rental stock has performed the strongest in 2024.
In London, one-bedroom properties grew by 2.2% over the past year, while properties with four bedrooms or more grew by a lesser 1.1%. Across prime regions properties valued under £2,000 pcm saw the strongest annual growth at 2.9%.
“Smaller, needs-based properties have been the strongest performers over the past 12 months due to continued strong applicant demand from young professionals, as well those based outside of the capital looking for a pied-et-terre, which in many cases has led to multiple offers,” continued Jessica Tomlinson.
Rental growth in regional towns and cities slows
Outside of London, suburban markets held up the strongest in Q4 (-0.3%), while regional towns and cities felt the most downward pressure on rental prices (-1.7%), following a strong first nine months of the year.
“The UK’s prime regional rental markets have experienced strong growth over the past two years, which will constrain the capacity for significant increases over the coming year. In particular, regional towns and cities including Birmingham, Cambridge and Reading performed strongly last year in response to back-to-work movements, but now demand has settled and stock is sticking in some locations, leading to price adjustments,” continues Jessica Tomlinson.
“Domestic, needs-based demand is likely to remain robust in 2025 along with traditional migration from urban locations, but this may be tempered by increased accessibility to home ownership as interest rates are expected to fall.”
What is the outlook for landlords?
Landlords are broadly less confident now than they were a year ago, according to Savills latest survey. It revealed that the top concerns include the ability to make a profit and the Renter’s Rights Bill, especially around increased notice periods to recover possession and the abolition of Section 21.
Jessica concludes: “for some Landlord confidence has been shaken in response to upcoming regulatory changes, and we have certainly experienced an uptick in those considering the sales market in the second half of last year. But for the most part, landlords that have stayed put remain undeterred.”
“The outlook for the prime rental market remains robust. Although growth has cooled, values are still expected to increase by more than +10% across all prime markets over the next five years.”
| 5-years to Sept 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 5-years to Sept 2029 | |
| Prime Central London | 14.2% | 2.5% | 3.0% | 2.5% | 2.0% | 2.0% | 12.6% |
| Outer prime London | 22.0% | 3.5% | 3.0% | 3.0% | 2.5% | 2.5% | 15.4% |
| Prime Regional | 26.1% | 3.0% | 2.5% | 2.5% | 2.0% | 2.0% | 12.6% |
Source: Savills Research
Note: These forecasts apply to average values in the second hand market, new build values may not move at the same rate.