In a historic shift for the UK housing market, the cost of renting a home has fallen for the first full year on record. New data reveals that a surge in first-time buyers and a growing trend of young adults delaying their move from the family home have cooled the once-overheated rental sector.
A Historic Drop in Rental Costs
According to research by estate agency Hamptons, the cost of newly-agreed rents across the UK dipped by 0.7% over the course of 2025. This marks the first calendar year decline since the agency began tracking this data in 2011. The slowdown originated in London, where rents on new tenancies fell most sharply by 2.7%, or roughly £63 per month, over the year.
By December 2025, the trend had spread to several other regions. Rents were also falling in the South East (-1.0%), the East Midlands (-0.2%), Yorkshire & Humber (-1.4%), and in Wales (-0.8%). This widespread decline follows a period of record-breaking growth, particularly in the capital where inner-city rent growth hit 13.2% in November 2023.
The Drivers: First-Time Buyers and 'The Bank of Mum and Dad'
Aneisha Beveridge, Head of Research at Hamptons, explained that the drop is less about tenants suddenly finding rents affordable and more about fundamental shifts in housing movement. "Falling rents were driven more by strong first-time buyer numbers and wider economic weakness than by improved tenant affordability," she stated.
The data shows a significant increase in first-time buyers entering the property market, accounting for one-third of all home purchases nationally in 2025 and as many as half in London. This was facilitated by lower interest rates making mortgages more accessible. Concurrently, fewer young people are entering the rental market, with many opting to stay in the family home longer due to economic uncertainty and a reluctance to commit to high rental costs.
Research from the Institute for Fiscal Studies underscores this, showing the share of 25 to 34-year-olds living with their parents has risen by a third since 2006.
Landlords, Renewals, and Future Pressures
Despite the fall in prices for new lets, the report highlights a continuing squeeze for existing tenants. Rents on renewed tenancies continued to climb by 4% or more in 2025. Furthermore, experts warn that the impending Renters’ Rights Act, due for implementation in May 2026, could inadvertently push advertised rents higher.
Ms Beveridge cautioned that if landlords find the new rules burdensome, it could slowly reduce the supply of rental homes. "From a supply perspective, the lack of appetite means the share of homes bought by investors could fall below 2025’s already low levels," she said. While the market may see continued growth as landlords seek new revenue streams, the coming regulatory change adds a layer of uncertainty for 2026.
