Rental growth continues but remains below inflation rate
New data from Hamptons reveals rents for new tenancies in Britain rose 1.9% year-on-year in July, reaching an average of £1,401 per month. Despite this increase, rental growth is still outpaced by general inflation.
Rental prices for new lets in Britain increased by 1.9% year-on-year in July 2026, according to figures from lettings agency Hamptons. This marks the fastest rate of rental growth for new tenancies in 19 months, pushing the average rent above £1,400 per month. The rise was mainly driven by Southern England, with Outer London rents surpassing £2,000 per month and the South East exceeding £1,500. However, overall rental growth remains below the general inflation rate, presenting a mixed picture for landlords and tenants alike.
Hamptons’ data also shows that while rents for new lets are rising, the annual rental growth for all tenancies—including ongoing ones—has edged down slightly from 2.2% in June to 2.1% in July. The average rent paid by existing tenants stands at £1,258 per month, lower than the figure for new tenants. The average rent increase where it occurs is now 5.6%, up marginally from earlier in the year. Scotland continues to see the highest average increases at 7.7%, significantly above other regions.
Details of rental growth and regional variations
Hamptons’ analysis highlights a regional shift in rental growth patterns. Southern England, which had previously lagged behind other regions, is now leading the rise in newly agreed rents. Outer London rents have climbed back above the £2,000 threshold after falling below it in early 2025. Meanwhile, the South East has reached an average rent of £1,500 for the first time in July 2026, aligning it with the national average rent for August 2023.
The overall annual rental growth for all tenancies remains modest at 2.1%, reflecting a cooling in the pace of rent increases for existing tenants. This contrasts with the faster growth seen in new lets, which suggests landlords may be adjusting rents more aggressively when re-letting properties but are constrained in raising rents mid-tenancy. The average rent increase where it occurs has nudged higher to 5.6%, indicating that when landlords do raise rents, the hikes are becoming slightly steeper.
Scotland stands out with a notably higher average rent increase of 7.7%, which is materially above the rest of Britain. This regional disparity may reflect local market conditions, supply constraints, or differing demand pressures. Landlords operating across multiple regions should be aware of these variations when setting rents or planning portfolio strategies.
Context of rental growth amid inflation and borrowing costs
David Fell, Lead Analyst at Hamptons, commented that although rental growth remains below the rate of inflation, the continued upward trajectory in rents over eight consecutive months provides some relief for landlords facing higher borrowing costs. The interplay between inflation, interest rates, and rental income is critical for buy-to-let investors, many of whom have seen mortgage expenses rise sharply in recent years.
For landlords, the fact that rents are increasing, albeit at a slower pace than inflation, means rental income is not fully keeping pace with rising costs. This gap can squeeze profit margins, particularly for smaller landlords or those with highly leveraged portfolios. However, the upward trend in rents for new lets may help offset some of these pressures over time, especially in regions where demand remains strong.
From a tenant perspective, the ongoing rise in rents for new tenancies adds to affordability challenges, especially in high-demand areas like Outer London and the South East. The slower growth in rents for existing tenants may provide some stability, but the overall cost of moving and securing a new tenancy is increasing. This dynamic could influence tenant behaviour, potentially leading to longer tenancies or increased demand for rent controls and regulatory interventions.
Implications for landlords and letting agents
Landlords should consider regional rental trends carefully when setting rents or reviewing portfolio performance. The stronger growth in Southern England, particularly London and the South East, suggests these markets remain robust despite wider economic pressures. However, landlords must balance rent increases with tenant retention and affordability concerns.
Letting agents will need to advise landlords on competitive rent setting, taking into account local market conditions and the differential between new lets and ongoing tenancies. They should also monitor regulatory developments related to rent increases, as growing affordability issues may prompt further government intervention or changes to tenancy laws.
Given the persistent gap between rental growth and inflation, landlords should review their financing arrangements and consider the impact of interest rate changes on their net rental yields. Strategic planning may involve targeting regions with stronger rental growth or diversifying portfolios to mitigate risks.
What landlords should consider now
- Review rental levels regularly, especially for new lets, to ensure they reflect current market conditions and regional variations.
- Monitor tenant turnover and retention rates, balancing rent increases with the risk of longer void periods or tenant dissatisfaction.
- Keep abreast of inflation and interest rate trends to understand the impact on borrowing costs and net rental income.
- Stay informed about potential regulatory changes affecting rent increases and tenancy terms, particularly in high-demand areas.
- Consider the affordability challenges faced by tenants and the possible implications for demand and rent arrears.
Keeping rental portfolios aligned with market and regulatory shifts
Membership of The Landlord Association (TLA) offers landlords and letting agents access to up-to-date compliance resources and practical guidance on managing rental increases and tenancy agreements in line with current legislation. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, is designed to help members organise rental documentation, record rent changes, and monitor compliance with evolving regulations. ORBIT also includes a property management AI assistant to support landlords in maintaining accurate records of rent reviews and tenant communications.
Exploring TLA membership and ORBIT BETA access can assist landlords in staying ahead of market trends and regulatory requirements, ensuring rental portfolios remain compliant and financially sustainable in a changing environment.
The rental market’s trajectory suggests landlords will continue to face the challenge of balancing rent growth with tenant affordability and regulatory constraints. Staying informed and organised will be essential for managing these complexities effectively.
Sources: Landlord Today
TLA - The Landlord Association