1. Prime London market
2. Prime regional market
3. Market activity

1. Prime London market

Across prime London, rental values remained broadly flat (-0.1%) over the fourth quarter, steadying after a traditionally busier third quarter. As such, annual growth totalled 1.5% over 2024. This is much more modest compared to previous years, where annual growth reached 4.3% in 2023 and a significant 10.8% in 2022. Over the past two years, the market has gradually readjusted, and an overall slowing in the rate of growth has resulted in annual increases returning to much more ‘normal’ levels.

On a quarterly basis, rents for prime properties across North West London fell the most significantly, down by -0.5% in Q4. However, this was preceded by a more robust first nine months of the year. Prime rental values across central locations and North & East London also decreased, both down by -0.2% in the quarter. Prime central London faced price sensitivity, particularly for higher-value properties where the market is typically more discretionary. But, seasonality played a large role across the more needs-based North & East London markets.

Elsewhere, prime rents were more resilient, with values increasing by 0.2% and 0.5% across South West and West London, respectively. Here, domestic demand remained strong, helping to underpin values across many locations. However, correct pricing still remains vital and those best-in-class properties continued to outperform over the final three months of the year. On an annual basis, prime rents across outer London regions were the top performers. While across central London, rents for prime properties were more steady, only increasing by 0.3% over the past year.

Across all prime London markets, smaller, lower-value prime rental stock has performed the strongest over the past year. On average, properties rented for £500 per week or below increased by 3.2% over the past twelve months. Whereas properties above £3,000 per week remained flat (-0.1%) over the year. This was mirrored across property size, where one-bedroom properties on average increased by 2.2%, with larger properties with five or more bedrooms growing by a more modest 0.9%. This is in part driven by the needs-based seams of demand across prime London from students, young professionals and families alike.

2. Prime regional market

Similar to the capital, prime rental values across the regional markets returned to seasonal trends over the fourth quarter. On average, rents fell by -0.9%, marking the weakest quarter since before the pandemic (Q3 2018). Historically, growth has slowed over the final quarter of the year across the prime regional markets, suggesting a return to more typical trends. And despite price adjustments over the fourth quarter, prime rents still remained 1.1% higher over the past year.

Across the commuter belt, suburban locations closest to the capital were the most resilient over the final quarter, with values falling marginally by -0.3%. Inner and outer commuter locations further from London saw more significant reductions of -0.9% and -0.7%, respectively. Elsewhere, regional towns and cities across the UK were the weakest performing over the quarter. Here, the market cooled significantly, as tenant demand reduced over the winter months, down from strong levels of international and student demand over the third quarter.

Across all regional submarkets, domestic needs-based demand supported rents for smaller and lower-value prime stock. On average, rents for prime properties with one or two bedrooms increased by 2.0% over the past year, while those larger homes with six or more bedrooms fell by -0.6% over the same period. Likewise, properties rented for £2,000 or less a month were the strongest performing with growth of 2.9%. This compares with properties over £4,000 per month, which remained stable at -0.1%.

3. Market activity

Over the final three months of the year, as with pricing, activity markers continued to revert to more typical trends. Indeed, new applicants registering with Savills in December were lower across all regions compared with November, and on par with December 2022 and 2023. But, levels were still elevated compared to December 2019, suggesting that the rebalancing is still in progress.

On the other hand, stock remained flat over much of the final quarter but was still below the same period pre-pandemic. This suggests that, while levels of available stock have continued to increase, they have not yet fully returned.

Looking forward, we expect increased regulation from the upcoming Renters’ Rights Bill and additional stamp duty for second homes to continue to put pressure on available supply, which will likely result in further upward pressure on rents. Read more about market sentiment and our latest five-year prime forecasts in the rest of the publication.

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