HISTORIC HESITATION

Historically, when buyers hesitate, renters step forward—and Q1 2025 has followed that well-established pattern. We’ve seen a significant uptick in applicant activity, with demand rising over 28% compared to Q4 2024. While it’s true that Q4 tends to be seasonally quieter, this year’s surge in demand was stronger than expected even when factoring in typical New Year momentum.Overall, applicant demand is also marginally up vs the same  period last year, underlining the strength of tenant appetite in early 2025.

Moreover, the number of our completed lettings  transactions has increased by 25% year-on-year, a clear indication that the market is not only busy with enquiries but successfully converting them into lets. This level of transactional activity is especially encouraging against a backdrop of economic uncertainty.

January and March: Bumper Months Driving Growth

January came out of the gates strong, bolstered by the familiar “New Year, new home” sentiment. March also proved unexpectedly busy. With Easter falling in April this year, much of the usual Easter holiday-driven tenant activity landed in March—especially among families and sharers looking to make the most of school breaks and free annual leave offering a stress free move experience . These two bumper months were instrumental in driving up transaction volume, leading to a significantly higher number of successful lets compared to Q1 last year.

Interestingly, while applicant levels were broadly in line with last year, we outperformed the wider market in terms of successful transactions. Many of our competitors reported a dip in volume, so we’re pleased—but not complacent—about our results. We pride ourselves on out-trading the market, but it’s important to keep perspective: wider market data suggests a marginal decrease in lettings activity and a general flatlining of rents across central London.

Stock Levels and Market Segmentation

Where we do align with broader trends is in stock composition. Around 75% of available properties fall into the studio, one- and two-bedroom category, with the remaining 25 % spread relatively evenly across three- and four-bedroom homes. We’ve also seen an increase in stock at the higher end—think £2000 up and also a small increase  in the £750 to £1,000 per week core market range

Stock levels overall have increased by approximately 10% over the course of Q1, and by 25% compared to the same time last year.

This boost in available properties has helped support the uptick in transactional activity without exerting significant downward pressure on rents.

This increase in higher-value listings is, we believe, partly due to a rise in “accidental landlords at the higher end of the market ”—sellers who’ve opted to rent out their properties instead of selling in a steady  market which hasn’t delivered them a successful sale. While the long-term outlook for London Sales values remains positive, with predicted growth of 10–15% over the next five years, many are now expecting that growth to begin in earnest from 2026 onwards. In the short term, this has contributed to more rental stock coming to market.

However, despite an increase in listings, rents have largely held firm. This might seem counterintuitive, but the key detail lies in where that stock has been added. The surplus has predominantly been in the higher-end price brackets, where demand is naturally more limited anyway and thus doesn’t represent a huge portion of the Lettings transaction pie. In the core rental market (bulk of that transaction pie I mentioned) —typically £500 to £1,500 per week—demand remains strong, and stock levels relatively tight on an available homes per applicant ratio. That imbalance is likely why we’ve seen rents flatline, despite higher stock  or even tick upwards in some cases. Especially in core markets.

Market Dynamics: Supply, Demand, and Perception

Another factor at play is perception. When there’s a bit more choice on the market, tenants are often more inclined to actively search. A market that feels “impossible” to navigate (due to lack of stock) can suppress demand. So, paradoxically, a moderate increase in supply can spur more transactional activity by restoring tenant confidence that moving is feasible and will not be in vein!

Looking Ahead to Q2

Early signs for Q2 are encouraging for Landlords . Stock is beginning to tighten again, and we’ve already seen strong applicant numbers through April. If this momentum continues, we expect April, May, and June to be busy—potentially even outpacing the same period in 2024, which itself as a period benefited as a depository for extra lettings applicants due to a slower sales market.

The Renters Reform Bill: Still in Limbo

On the legislative front, we’re still waiting for clarity on the Renters Reform Bill. The legislation is currently under scrutiny in the House of Lords and progress has been slower than anticipated. Legal experts suggest that Royal Assent is unlikely before the summer recess, and if it’s still in limbo come autumn, we may not see a go-live date until 2026.
 
As ever, we wish our clients a fantastic Quarter 2, whether in their family, property or business sphere’s!

Kind regards,

Matt Staton
Head of Residential
Berkshire Hathaway HomeServices London