London rental affordability improves as salary threshold falls

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London rental affordability improves

Highlights

The average pre-tax salary required to rent in London fell 17 percent year-on-year to £71,550 as of June, with average rent at £2,385.
A net balance of 18 percent of agents reported increased demand while 18 percent reported fewer new rental listings, indicating tightening supply and continued upward pressure on rents.
Agents expect average rents to grow 2.5 percent over the next 12 months, with some landlords exiting the market due to increased regulatory burdens under the Renters' Reform Act.

Salary requirements fall as rents shift

As reported by Financial Times, citing ARLA Propertymark research, the average pre-tax salary needed to rent an averagely priced home in London falls 17 per cent in the year to June, to £71,550. Average rent in the capital stands at £2,385 in June, covering both inner and outer London, down from £2,875 a month in June 2025.

Affordability also improves in the north-west, where a home can be rented on a salary of £33,300, down 17.5 per cent from a year earlier. The broader picture remains uneven, however, with Scotland becoming less affordable by the measure of tenants' salary requirements.

Kim Lidbury, president of ARLA Propertymark, says the latest figures highlight different speeds across regional rental markets. She says rents continue to rise in London, the north-west and the south-east, while other regions see more stable pricing or modest declines.

Lidbury adds that even where rents fall over the year, including in London, they remain well above historic levels and demand for homes continues to exceed supply. London rents are 59 per cent higher than the UK average of £1,500 a month.

Supply pressures shape rent outlook

The rental figures are based on the final agreed price at which properties are let rather than their initial listing price, with data drawn from 15,000 agencies linked to Propertymark. Salary estimates are based on the average earnings thresholds required by referencing agencies used by landlords and letting agents.

Separately, the latest monthly market report from Rics finds demand is picking up in the lettings market. A net balance of 18 per cent of agents reports rising demand over the past three months, the strongest reading since May 2025, while a balance of 18 per cent says new rental instructions from landlords are down over the same period.

With supply tightening, agents also expect rents to keep rising. Average expectations point to rental growth of 2.5 per cent over the next 12 months, and some agents say more landlords are selling because of the heavier regulatory burden under the Renters' Reform Act.

Colin Townsend of John Goodwin in Malvern says landlords are still adjusting to the new rules. He says smaller portfolio owners in particular are under pressure and, in many cases, are leaving the market.

In our earlier article on Zillow Group (ZG), we covered how the stock came under pressure amid increased regulatory scrutiny and lawsuits tied to its Redfin agreement, even as the company launched its Zillow Pro agent membership. We also noted that tight housing supply in several U.S. markets was intensifying rental competition and keeping upward pressure on rents. Together, those factors highlighted how regulation and supply constraints can shape both rental conditions and the outlook for property-related businesses.

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