Office for National Statistics (ONS) figures released last month reveal that the rise in average private rents across the UK in the year to July slowed to 5.9%, from 8.6% over the previous 12 months.

This rental growth slowdown has led landlords and investors to question if we could be seeing the beginning of the end of the rental boom.

Lettings and lending experts suggest a range of reasons for the lower growth rate and have differing views on its impact on the sector.

Lucy Jones, chief operating officer at Lomond, one of the UK’s largest lettings and sales agents, says: “After years of steeper rises, the market is rebalancing, as affordability [limits have] stemmed how sharply rents can climb.

Demand won’t just disappear. People still need homes and there is still a fundamental shortage of housing stock, but tenants are weighing up space, location and affordability. It’s a shift from boom to balance. Yields remain healthy and steady growth makes long-term planning easier.”

Jones believes “the media has overstated the so-called exodus” of private landlords from the market. She adds: “Yes, some have opted to sell, but the numbers are modest and we’re also seeing landlords capitalising on opportunities to expand their portfolios. Those with a long-term view see opportunity in today’s more stable market, and the Renters’ Rights Bill will reward landlords managing their portfolios professionally.”

Gary Jeffries, head of residential property at agency Vail Williams, says weaker demand is also affecting rents. Interest rate cuts and “improved access to mortgages allow more households to consider buying, while the expansion of build-to-rent schemes adds new supply”, he explains.

Challenging environment

He adds: “For landlords, particularly smaller-scale operators, this combination presents a challenging environment. They are navigating compliance complexities, changes to tax treatment for private landlords and the imminent impact of renter reform.

“These pressures are likely to encourage some landlords to exit the market, which could dampen investor demand and contribute to a modest cooling in house price growth.”

He adds: “Larger, listed residential landlords and institutional investors are better positioned to manage these market dynamics. Their scale, lower funding costs and professional management give them resilience that smaller landlords often lack.”

Yields remain healthy and steady growth makes long-term planning easier
Lucy Jones, Lomond

Mish Liyanage, chief executive of property investment company Mistoria Group, adds: “As regulatory complexity increases, the advantages of scale, internal legal teams and investment in systems becomes clearer. Listed rental companies can also tap into build to rent, offering tenants professionally managed homes with predictable service standards. But they’re not immune to pressures. They still face rising acquisition costs, interest rates and potentially softer rents in saturated locations.

“To stay competitive, these companies will need to maintain high occupancy through tenant-centric offerings, flexible leases, well-maintained homes and tech-driven services. Those who deliver a high-quality tenant experience will win.”

Cooling rents mean landlords can no longer rely solely on annual rent hikes to maintain margins, especially in light of new compliance costs and changes in the Renters’ Rights Bill.

For landlords with highly leveraged properties or older housing stock requiring upgrades, this could reduce net yields and create pressure to exit the market, according to many experts.

Tony Hall, head of business development at buy-to-let lender Saffron Building Society, says: “Falling rental yields could prompt some smaller landlords to exit the market. For portfolio landlords, that creates an opportunity to expand, as lower yields are likely to translate into more competitive asking prices.”

Unlike Lomond’s Jones, Liyanage believes the exit of smaller landlords is a real concern. “A key driver is regulatory fatigue,” he says. “Increased taxes, compliance requirements like mandatory registration and uncertainty around eviction laws are prompting smaller or accidental landlords to exit.”

Big advantage: the corporate owners of large build-to-rent blocks are better insulated against a rental slowdown

He adds: “Limited company structures now account for 70% of all new buy-to-let purchases, showing that only those with a long-term strategy, tax planning and scale are weathering the storm. For smaller landlords, the cost-benefit ratio is becoming harder to justify, particularly with rent rises slowing.”

Emma Cox, managing director of real estate at buy-to-let lender Shawbrook, says that the cost-of-living crisis and nominal 5% UK wage growth are other reasons for lower rental growth. “The slowdown in annual rental prices reflects a rebalancing of supply and demand, with more rental stock coming to market while tenant demand has eased slightly,” she adds.

“Affordability pressures have acted as a ceiling on rental growth after several years of sharp rises, and when combined with easing inflation and wage growth not keeping pace with past rent hikes, these factors have limited further upward movement. As a result, some landlords have adopted more moderate pricing strategies to avoid prolonged void periods, as competition for tenants becomes less intense.”

Cox agrees that smaller landlords are feeling the pressure. “A slower pace of rental growth reduces landlords’ headroom to absorb rising costs, such as mortgage payments, regulatory compliance and maintenance,” she says.

“Those with higher leverage may feel things more acutely, especially smaller buy-to-let investors on variable mortgage rates.

“However, those with stronger capital bases or long-term horizons will see greater stability in rental income compared with the volatility of the past two years.”

But she remains bullish on the overall market: “Cooling rents may encourage landlords to focus on retention and tenant quality rather than maximising short-term rental yields.” She adds that the market “may mature into a more sustainable, less overheated rental cycle, ultimately favouring professionalised landlords.”

Liyanage is also upbeat: “The UK rental market isn’t collapsing; it’s recalibrating. After years of runaway growth, we’re seeing a return to more sustainable trends. Professional landlords who focus on quality, compliance and long-term strategy will continue to thrive, while those unable or unwilling to adapt may exit.”

Fragile market

However, the National Residential Landlords Association (NRLA) warns that recovery in the rental market remains fragile, with demand for rental housing still outstripping supply.

Ben Beadle, chief executive of the NRLA, says: “While a slowdown in rent increases will be of some relief to tenants, the rental market remains in a fragile state. Tenants across the country continue to face the reality of there not being enough homes to meet demand.

“Meanwhile, the sector is craving certainty about how the government plans to implement the biggest overhaul of the market for almost 40 years. Now is the moment for ministers to get behind a clear, credible plan that eases pressure on renters, supports investment in new homes to rent and ensures the smooth implementation of the Renters’ Rights Bill.”

If more rental properties hit the market over the next 12 months, it may have an impact on the sales market. Liyanage says: “In the short term, I expect little impact on house prices, especially in areas where housing stock remains constrained. Landlord sales may add some supply to the market, but owner-occupier demand is still strong, especially in regions benefiting from regeneration, infrastructure investment and a growing student population.

“We may see pressure in lower-yielding areas or places with oversupply. But broadly speaking, the exit of landlords is unlikely to flood the market with stock, and rising rents, even at a slower pace, continue to support valuations from an investment perspective.”