London rents are rising to record highs due to an imbalance between supply and demand, with tenants now spending up to 40% of their income on rent.
As a property manager working in London for many years, I’ve seen the city’s rental market go through it all – from post-recession recovery to pandemic slowdowns.
But the situation we’re looking at in 2025 feels different. For tenants, it’s tougher than ever. For landlords, the pressures are growing. So, what exactly is going on with London rents?
Rents Are Rising – Again
Let’s start with the headline: London rents are at an all-time high, with the average rent now sitting at £2,695 per month according to London Daily News. That’s not just a blip – it’s the result of 13 consecutive quarters of increases.
Since the pandemic, rents in London have increased by around 37%, and it can be hard to tell when it might slow down.
The Growing Divide: Inner vs. Outer London
One of the most interesting trends is where rent is increasing. While Inner London boroughs like Kensington and Chelsea are still the most expensive areas (averaging £3,459/month), they’ve actually seen slower growth – about 3.1% year on year.
However, Outer London, which is becoming more popular due to its perceived affordability, is seeing double-digit rent hikes.
For example, stats by London Daily News Show:
- Thornton Heath (Croydon): +14%
- Harlesden (Brent): +12%
- Greenford (Ealing): also seeing substantial rises
This shift is largely driven by tenants leaving central London to look for cheaper rents. But demand has now spilled into suburban boroughs, sending prices upward there too.
For landlords and property investors, this certainly presents an interesting opportunity.
Why Are London Rents So High?
The short answer? Demand is massively outstripping supply. But the reasons behind that are multi-layered:
1. More People Are Renting, For Longer
With London house prices still sky-high (averaging £529,369 according to Nationwide, or even more via Rightmove), fewer people can afford to buy. Add to that the reduction in stamp duty thresholds in April 2025, and it’s no surprise many would-be buyers are staying in the rental market.
2. Landlord Costs Are Rising
Many landlords are now facing higher mortgage repayments due to interest rates that remain above 4.5%. Some are selling up, reducing supply. Those who stay are often forced to pass on costs to tenants, simply to break even. Add to that increased regulation, maintenance fees, and service charges, and the economics become strained on both sides.
3. Construction Slowdown
Post-Brexit labour shortages have made building and renovation work more expensive and slower to complete. This has limited the supply of new rental homes and made repairs harder for existing landlords to manage affordably.
4. No Rent Controls
Unlike cities like Berlin or New York, London has no formal rent controls. That leaves the market wide open to inflation – especially in high-demand areas.
How Are Londoners Responding?
One of the most sobering statistics we’ve seen is that Londoners are now spending around 40% of their income on rent. That’s well above the 30% threshold that is usually seen as affordable. For many households, this is pushing them hard.
The response has been predictable:
- More flat shares, even among professionals in their 30s and 40s.
- More people leaving London entirely, heading for commuter towns or even heading to other cities.
- An increasing number of tenants delaying starting families or giving up on homeownership altogether.
However, it will be interesting to see how Labour’s Renter’s Right’s Bill will affect the market, and whether it might help bring prices down.
So Why Aren’t House Prices Rising in the Same Way?
This is the interesting part: while rents are rising, house prices in London are flatlining.
According to the latest Nationwide data, annual house price growth in London is just 1.9%, the slowest in the UK. Compare that to 13.5% growth in Northern Ireland, or nearly 6% in the North West, and the contrast is clear.
Why? Because mortgage affordability is stretched. While prices are high, buyers are fighting:
- High deposit requirements
- Tightened lending rules
- Relatively high mortgage rates (~4.7% for a 5-year fix)
- The end of stamp duty breaks
This has resulted in many buyers sitting on the sidelines, creating less movement in the housing market – and leaving more people competing for rental properties instead.
What’s Next? Is There Any Relief in Sight?
There are reasons for cautious optimism – but only just.
Interest Rates Might Fall
Markets expect the Bank of England to cut rates twice more in 2025, possibly helping landlords and first-time buyers with borrowing costs.
Rental Supply Might Improve
Some new housing schemes are expected to launch in the second half of 2025. The spring sales season has seen more homes listed than in any March since 2015, which could increase choice for renters – and reduce price pressure slightly.
Calls for Policy Reform
London Mayor Sadiq Khan has proposed a two-year rent freeze, which, if implemented, could slow the surge. Meanwhile, property professionals are asking the government to:
- Speed up planning approvals
- Incentivise landlords to stay in the market
- Build more affordable homes
But without a national strategy, the imbalance between supply and demand is unlikely to shift in the near term.
Final Thoughts: What Tenants and Landlords Should Do
For tenants:
- Act quickly when you find a good place – good rentals don’t stay on the market long.
- Get your paperwork ready in advance to secure deals.
- Negotiate where possible, especially if properties have been listed for a while.
For landlords:
- Be realistic with pricing – if you overcharge, your property may sit empty.
- Consider the benefits of longer-term tenants, even at slightly lower rents.
- Stay up to date with regulatory changes, especially around rent caps and mortgage rules.
London Rents: What’s Next?
London’s rental market is facing its most intense squeeze in years. Prices are at record highs, supply is tight, and affordability has reached breaking point for many.
As a property manager, I see the struggle on both sides – tenants trying to survive, and landlords are trying to stay afloat.
It will be interesting to see what the rest of 2025 has in store.
Need help managing your rental property in this fast-moving market? At J Property Management, we work with landlords across London to minimise void periods, find reliable tenants, and keep your property compliant and profitable. Email our team at info@jpropertymanagement.co.uk to find out how we can help.
