Rents in the capital dropped back to 2023 levels as five of the 11 regions in Great Britain saw rents fall in 2025, according to data from Hamptons.
The Hamptons Lettings Index found newly agreed rents dipped by 0.7% over the year, with tenants paying an average of £1,371 per month, £10 less than last year for the same property.
London saw the biggest drop, with newly agreed rents down 2.7% or £63 per month, returning to June 2023 levels.
By December, rents were also falling in the South East, East Midlands, Yorkshire & the Humber and Wales.
Three regions – East of England, South West and Scotland – recorded rental growth below 1.0%.
Current trends suggest these areas could see rent falls in early 2026.
Stock levels ended the year 6% higher than in December 2024, with the number of homes available for rent now only 8% below 2019 levels.
Landlord activity declined in 2025, with 10.9% of properties bought by landlords, down from 12.0% in 2024 and well below the 15.8% recorded in 2015 before the 3% Stamp Duty surcharge.
This was the lowest share since records began in 2012 and the first time it fell below 11.0% for a full year.
The fall came after landlords paid the higher 5% Stamp Duty surcharge.
The North East remained the most investor-heavy region, with landlords buying 29.0% of homes.
The East Midlands and West Midlands followed. Northern regions continued to lead for buy-to-let (BTL), but falling rates saw more landlords in the South East, East of England and North East.
New lets usually set market rates, with renewal rents moving closer over time.
In 2025, contract renewal costs rose 3.3% to £1,310 per month, leaving a £61 gap between new lets and renewals – the smallest since July 2021 and down from a peak of £170 in October 2023.
Aneisha Beveridge, head of research at Hamptons, said: “On paper, 2025 looked like a good year for tenants. Rents on new lets ended 2025 lower than they started, and tenants had more choice than before.
“However, falling rents were driven more by strong first-time buyer numbers and wider economic weakness than by improved tenant affordability.
“Fewer tenants are taking their first step into the rental market, with many staying at home longer and being reluctant to commit to the cost of renting a place of their own.”
Beveridge added: “2026 brings the implementation of the Renters’ Rights Act in May, which bans offers above the asking rent.
“This means that agreed rents and advertised rents may start to rise at different rates.
“The block on landlords accepting a price above what they asked for is likely to push up advertised rents, with more tenants making offers below the higher asking price instead.
“However, at least initially, it is unlikely to impact the values actually being achieved.”
She said: “But towards the back end of the year, it’s possible the implementation of the Renters’ Rights Act may start proving inflationary for agreed rents.
“If landlords start to find the procedural and legal machinery underpinning the new rules lacking, it is likely to slowly squeeze rental homes out of the market.
“From a supply perspective, the lack of appetite means the share of homes bought by investors could fall below 2025’s already low levels.”