Are newly built properties the only way to meet rising tenant demand?

February 5, 2025

Tenant demand in the UK is extremely high. The latest figures from Rightmove’s January 2025 Rental Price Tracker show that there is an average of more than 10 rental applications for every property that enters the market – something that should give every landlord confidence when considering their next investment.

Several factors have combined to cause this, including:

Some landlords leaving the market, reducing the number of available properties
House prices continue to increase, keeping more people in the rental sector
The standard of rental property improving, making it a more appealing option

However, the most important factor is the low supply of newly built homes entering the market. Until enough homes are built, tenant demand will keep increasing – but there’s little sign of that happening.Until it does, rents will only rise, benefitting anyone who invests in the UK buy-to-let property for sale in 2025.

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The UK’s housing supply problem

The Centre for Cities has estimated that there may be as many as 4.3 million homes missing from the market already – a number that increases every year.

To close that gap, “would require 442,000 homes per year over the next 25 years or 654,000 per year over the next decade in England alone”.

The situation though is getting worse. Government figures show that just 153,800 new homes were completed in the year ending in March 2024 in England. That’s a 12% decrease year-on-year and shows that the supply problem is no closer to being solved.

In the last six months, the numbers have fallen again. Just 107,000 new home completions have been recorded since July 2024 according to BBC figures. That’s a 10% annual fall and means that there are even fewer new homes to go around.

In practical terms, that means:

Demand for housing will go up
That competition will cause house prices to grow
Fewer people will be able to buy, meaning more will rent
Rents will keep going up as a consequence

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Will the UK’s housing supply problem be solved in the future?

The new Labour government was elected in 2024 on a promise to build 300,000 new homes a year, or a total of 1.5 million throughout this Parliament. Following that election, the target was increased to 370,000 new homes per year.

However, the figures mentioned above show that the government is going to struggle to achieve that target. They will need to massively increase the current rate of housebuilding at a time when there is a serious labour shortage and local Councils are not able to find enough land to meet targets.

Even if all of those problems disappeared, the supply issue in the UK is so severe that even 370,000 new homes a year wouldn’t be enough. In practical terms, the UK has a permanent supply shortage that it can’t solve.

The National Housing Federation has estimated that the government will miss its target by approximately 500,000 homes in the next four years.

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What does this mean for renters?

Without a huge influx of newly built homes on the market, rising tenant demand cannot be met and competition for rental homes will keep increasing. That will push average rents up over the next four years by the following amounts according to JLL:

2025 – 3%
2026 – 2.5%
2027 – 3%
2028 – 3.5%
2029 – 4%

By the end of the decade, landlords will see their monthly rental incomes go up by an average of 17.1% in the UK. In some markets that is likely to be even higher. For example, luxury city centre apartments for sale will naturally command higher rents than older properties or homes that are in less desirable locations.

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Where to invest in 2025?

Places like Manchester, Liverpool and Birmingham are growing rapidly and are likely to see rents increase faster than the national average. People are moving to these cities in record numbers for the lifestyle, job opportunities, world-class education and unique culture on offer. They all need places to live, but there aren’t enough homes to go around.

The latest Deloitte Manchester Crane Survey gives us a perfect example of how this works in reality.

Rents in the city increased 11.4% in the last year thanks to the overwhelming demand. Tens of thousands more people are set to move to the city by the end of the decade, yet only just over 10,000 new homes are set to be completed in Manchester over the next four years.

That’s a recipe for further rental growth and explains why so many investors are keen to buy Manchester property to maximise their income. Without more new build properties, tenant demand will keep going up and landlords can keep enjoying the benefits of the national housing shortage.

Want to learn more about the UK market and how to invest in UK property effectively? Our team of expert consultants is available now to provide you with bespoke investment solutions and strategies tailored to your personal situation. Get in touch today to begin your investment journey.