The UK Living sector continues to demonstrate strong structural resilience, underpinned by persistent supply constraints and sustained institutional investor demand, despite a moderation in rental growth during the second half of 2025, according to BNP Paribas Real Estate’s UK Living Market Q4 2025 report.
The report finds that while rental growth has slowed from recent peaks – with the ONS rental growth index easing to 4.0% year-on-year in December 2025 – underlying market fundamentals remain robust. A prolonged slowdown in new housing delivery, combined with an ongoing withdrawal of private landlords from the rental market, continues to support medium-term Living sector strategies.
Rebecca Shafran, Alternative Markets Research at BNP Paribas Real Estate commented: “The recent cooling in rental growth should not be mistaken for a weakening of the UK Living market. Structural undersupply remains firmly in place, and the development pipeline shows little sign of improvement. With fewer rental homes coming forward and private landlords continuing to exit the sector, professionally managed Living assets are well positioned to absorb demand over the medium term.”
Indicators across the construction and planning pipeline point to further constraints on future supply. Brick and block deliveries fell year-on-year in late 2025, while housing project starts and detailed planning approvals also declined. At the same time, the latest RICS Residential Market Survey shows landlord instructions at their most negative level since April 2020, a trend expected to persist as key provisions of the Renters’ Rights Act take effect.
Investment activity across Living sub-sectors remained resilient in 2025, with Build-to-Rent (BTR) and Single-Family Rental (SFR) investment volumes reaching approximately £4.6bn for the year, comfortably above the long-term average. The Single Family Rental (SFR) sector continued to attract significant interest, highlighted by several large-scale portfolio transactions involving domestic and international capital.
Simon Williams, Head of National Markets at BNP Paribas Real Estate added: “What we are seeing is a clear reallocation of capital towards Living assets that offer durable income and long-term demand visibility. In a more challenging underwriting environment, investors are prioritising sectors with strong occupational fundamentals, and the UK Living market continues to stand out in that regard.
“Given all the dynamics at play, investors are being increasingly selective and discerning about where they invest. They need visibility on the long-term trends not just short-term metrics.”
Appetite has sustained from global investors, including pension funds and long-term institutional capital from Australia, Asia and the United States, seeking exposure to UK Living strategies. This interest has been supported by a stabilising near-term macroeconomic backdrop following the Autumn Budget, which helped to reduce interest rate volatility, even as longer-term fiscal concerns remain.
Within specialist Living segments, the student housing market showed early signs of demand recovery, with UCAS data indicating a 7.4% year-on-year increase in applications for the 2026/27 cycle. However, the report notes a growing bifurcation between higher-tariff universities and other locations, with investors increasingly focused on cities home to top-ranking institutions.
Looking ahead, BNP Paribas Real Estate expects rental growth to continue at more moderate levels than those seen over the past three years, but with the structural imbalance between supply and demand likely to persist, the Living sector is expected to remain a core focus for investors seeking defensive growth and long-term income stability.
