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City Relay’s London Rental Property Market Forecast: What to Expect and How to Thrive in 2025

Written by Diana Santos

The London rental property market continues to evolve as it faces economic changes, new regulatory developments and the constantly shifting demands of tenants and guests. As a property owner and landlord, how will this affect your rental business in 2025?

To ensure that these issues will positively impact your rental properties, you have to first understand what’s going on in the market. Scrutinise the issues affecting it so you can realign your strategies and position your portfolio to grow significantly this year.

In this article, you’ll learn more about the state of the London rental property market as it enters 2025. You’ll get a brief look back on what happened during 2024 to understand where the new year’s growth potential will be coming from. You’ll get a deeper look at the changes and challenges to be expected in the next 12 months – and you’ll get insights on how you can use these to your advantage.

A Look at the London Rental Property Market in 2024

According to reports, 2024 was about the same as 2023. The new prospect tenants were slightly higher (0.6%), viewings were reduced a little (0.2%), tenancies were moderately lower by 6% while new listings were higher by 3%. Towards the second half of the year, there was an impressive 15% growth in the market.

For the short-term letting industry, City Relay’s 2024 data showed a modest 5% growth for new bookings and reservations. Total nights booked grew by 11%-12% while the average daily rate grew by 2%. All in all, booking revenue in 2024 showed 15% growth compared to 2023.

What do all these figures mean?

This data shows a stable and predictable lettings market that leaves room for growth. You can strengthen your property’s growth potential by understanding the crucial issues you’ll face as a landlord and property owner.

3 Key Rental Property Market Trends this 2025

With all the upcoming changes and regulations in the London rental property market, there are three things you should focus on to keep your letting strategy effective.

Sustained Demand for Rental Properties

According to government statistics, London enjoyed an 11.5% rent inflation, with an average rent increase of 9.2% or £1,369.

As London continues to be an attractive destination for travellers, students, and professionals – it will fuel the continuing demand for rental properties. Whether it’s long-term or short-term accommodations, this ensures rental property owners have continued income potential.

What can landlords do?

Rental property owners can take advantage of this by making their properties stand out as a quality housing option. 

  • Upgrade into a modern and sustainable property by installing energy-efficient appliances and offering high-speed Internet. 
  • Highlight your well-maintained and visually appealing rental through targeted marketing campaigns.

Rising Competition

The high demand for London rental properties has made it a lucrative investment opportunity – adding to the pressure of saturation and the need to stay competitive. Tenants and guests have more choices and this means you need to step up to differentiate your property from the rest.

What can landlords do?

Staying ahead of the rising competition takes more than just a well-maintained property.

  • Understand what your ideal tenants or guests want to meet their expectations.
  • Offer a combination of premium property with exceptional service.
  • Partner with an experienced property management company to enhance your property listing.
  • Add sustainable features like smart home technology to attract eco-conscious guests.

Regulatory Changes

The Renters’ Rights Bill 2024 will set a new standard for the private rental market and it’s up to property owners to make sure they are completely compliant. From the Decent Homes Standard to the abolishment of Section 21, you have to understand how these changes will affect the earning potential of your property. While these changes are meant for tenant security, they can guide you in providing better living conditions.

What can landlords do?

Compliance is not just about avoiding legal issues or penalties, it’s also about elevating the premium quality of your rental property.

  • Keep an eye on the progress of the Renters’ Rights Bill 2024 and other regulations.
  • Make time to audit your property to ensure compliance. 
  • Choose a property management company to help protect your property investment through complete compliance.

2 Challenges to Watch Out For

Although the London rental market remains a lucrative investment, 2 challenges can compromise its full earning potential.

Rising Cost of Business

National Insurance contributions are set to rise in 2025 and this will affect operational costs for businesses – including property management. Housekeeping and maintenance fees will rise and large portfolios will feel the higher costs of business. Add to this the new compliance requirements, you’ll have to pay for several upgrades to avoid penalties and charges.

What can landlords do?

  • Minimise the impact on your profit margin by offsetting these costs through dynamic pricing strategies. 
  • Use AI data-driven tools to include current trends in reducing operational costs (e.g. optimise maintenance schedules by factoring in traffic conditions and property locations)
  • Explore tax benefits associated with green upgrades. 
  • Conduct preventive maintenance to avoid expensive repairs.

Complying with EPC Requirements

The energy-efficiency deadline (EPC rating) may have been moved to a later date but that doesn’t mean you should be complacent. Raising your EPC rating would take some investment and several improvements to your property. Failing to meet the deadline could compromise your property’s earning potential. Not only that, you might be asked to pay hefty fines.

What can landlords do?

  • Start prioritising upgrades on your property now. 
  • Switch to more energy-efficient heating systems. 
  • Improve the insulation in your property to keep energy costs low. 
  • Use double-glazed windows as well to improve the sustainability of your property.

How to Succeed in London’s Property Market this 2025

The London rental property market is expected to remain robust during the first quarter of 2025. With consistent rental demand and strong income opportunities, property owners like you should focus on standing out to ensure high occupancy rates.

Use data-backed pricing strategies for maximum rental yields. Focus on delivering exceptional services by prioritising communication, guest relations and property maintenance. Partner with a property management company to streamline operations and optimise costs.

As we enter into the new year, adopt a forward-thinking approach so you can position your portfolio to succeed this year. If you need assistance in maximising rental returns in 2025, contact City Relay. We offer end-to-end property management services that include, marketing, housekeeping, maintenance and even compliance.

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