As rental costs continue to rise across England, an impending limit on what tenants can afford appears on the horizon. Estate agency Savills has highlighted that while demand still far exceeds supply, an affordability “inflection point” is becoming more evident, particularly in London.
Limited supply, rising demand
Savills’ associate director, Guy Whittaker, points to the stagnant supply of rental properties, which has not seen substantial growth this year and is expected to remain low throughout 2025. “RICS property market surveys have consistently shown a shortage of new rental homes coming to market,” Whittaker explains. “In fact, listings per letting branch were 16% below 2018-19 levels in September,” he adds, noting this imbalance has driven the steep rise in rents seen in recent years.
This supply-demand gap is set to continue pushing rents up next year, despite income stagnation. However, Whittaker notes that affordability concerns are beginning to temper rent increases, particularly in London, where the strain on tenant finances is most acute.
Regional rent growth slows
Savills’ latest report reveals that rent growth has slowed, with average rents increasing by 4.3% nationally over the 12 months to September 2024—less than half the previous year’s growth rate. London, in particular, has seen significant moderation, with rents rising by only 1.7% as affordability pressures restrict further increases.
In London, where rents had already been stretching tenant budgets, tenants are beginning to reach their limit, and the pace of rent growth is slowing. Whittaker notes, “We’ve already started to feel the drag of affordability in recent months.”
Where will new supply come from?
With a combination of regulatory and financial pressures, Savills’ report highlights concerns about where new rental supply will come from. Whittaker points to the rising costs associated with upgrading properties to meet C-level Energy Performance Certificates (EPCs), as well as tax and legislative challenges that are prompting many landlords to consider exiting the market.
As England’s rental market inches closer to its affordability ceiling, the question remains: without new supply, how will the sector sustain itself, and what impact will this have on renters? The coming year may reveal just how much pressure the market—and tenants—can bear.
