In January 2025, rental growth for new lets increased by 1.8% from the previous year, continuing an 18 month trend of slowing growth, according to the Hamptons Monthly Lettings Index.
Tenants renewing contracts saw a 6% rise in rents as they adjusted to current market levels.
Over the past five years, rents for new lets have grown by 34%, compared to a 26.5% increase for renewals.
Landlord purchases made up 9.6% of home sales in January, dropping below double digits for the first time since 2009.
In London, rental growth for new lets fell by 0.7%, while renewals increased by 6.8%.
The Northern regions, including the North East, North West, and Yorkshire & Humber, saw a 3.5% rise in rents, down from 8.4% a year earlier.
Meanwhile, the Southern regions outside London experienced a 3.1% increase, compared to 6.2% the previous year.
Although there was a 3% rise in the number of available rental homes in January, this was the smallest annual increase since August 2022, with availability still below pre-Covid levels.
London faced a 25% decrease in rental listings compared to last year.
Aneisha Beveridge, head of research at Hamptons, said: “The pace of rental growth nationally has likely bottomed out.
“There are some signs that growth outside London is slowly picking up again, but we’re unlikely to see it run at the same rate as it has over the last few years.
“Rather, a squeeze in the number of rental homes on the market has made securing a property more competitive than it has been in recent months.”
Beveridge added: “What happens to rents on newly let homes tends to play out in the renewal market around 18 months later.
“So we expect tenants renewing their contracts to face smaller increases in 2025 than they did in 2024.
“Over the past five years, the lag between the two markets has saved sitting tenants an average of £6,641 each year, a saving which would have been wiped out had increases in renewal rents tightly tracked new lets.”
She said: “New purchases by landlords have been depressed by increases in stamp duty rates towards the end of last year and the prospect of tighter regulation in the form of the Renters’ Rights Bill.
“While purchases by landlords haven’t completely dried up, it’s looking like higher stamp duty rates have reduced the share of homes sold to landlords by between 10% and 20%.”
