Prime London & UK rental market update Q4 2026

Rental growth continues to edge up across prime London and the wider UK market, with steady demand set against tighter supply.

Key facts:

• Prime London rental growth climbed by 0.9% in Q3, taking the annual rise to 2.6%, up from 2.3% in Q2 and 2.1% rise in Q1
• Average UK rents rose by 3.8% in the year to August, up from 3.7% in the 12 months to July, with rents rising by 5.8% in the North West  
• Demand in the rental market remains steady in the face of tighter supply. The Renters’ Rights Act, which came into force in May, continues to change dynamics in the market as some accidental landlords choose to exit the market, especially in higher value markets

The landscape for landlords has changed in recent years. Several rises in stamp duty charges and the recent Renters’ Rights Act (RRA) in May mark significant adjustments in the market. In addition, from next year, individual landlords will face higher income tax changes, and all landlords will face decisions about how much to invest in their properties which are currently not meeting EPC standards. All of these considerations mean that some landlords, especially those with one or two properties, or those ‘accidental landlords’ who inherited a property or kept a previous home, to review their portfolios. Some have chosen to sell their property.

However, some larger investors are seeing an opportunity in the market, with a proportion of properties sold by exiting landlords being acquired by larger investors, who are taking the opportunity to expand their portfolios and return these homes to the rental market.

Even so, there is pressure on supply as demand in the rental market remains strong. Higher borrowing rates means that some prospective buyers will stay in the private rented sector for longer, expanding demand even as supply eases. This is adding upward momentum to rents.

Rents in prime central London climbed by 1.2% for flats and 0.9% for houses in Q3, taking the annual increase to 2.2% and 1.6%. In the wider prime London market, average rents rose by 0.9% between July and September, taking the annual change to +2.6%. There are also signals that at the very top end of the prime London market, there is more demand for rental homes as international buyers choose this tenure for a home in the capital instead of purchasing. Properties rented out for more than £100,000 a year are not subject to the RRA, and those choosing to rent do not have to worry about any additional property purchase or ownership taxes.

Outside prime central London, the prime rental market in the South West of London continues to outperform, with rents for flats up 3.9% on the year. highlighting ongoing domestic demand in this market too.

UK rental market

UK rental growth picked up slightly in August, rising to 3.8% year on year from 3.7% in July, according to the latest ONS data.

The balance between demand and supply continues to underpin the market. Tenant demand remains resilient, while the availability of rental homes is still limited, leaving little scope for rental pressures to ease.

Growth is strongest in the more affordable northern markets, as illustrated by the map below. Rents rose by 5.8% over the year in both the North East and North West, almost double the 3% recorded in the South East.

Changes to regulation and taxation are adding to the pressures facing landlords. Alongside the new requirements under the RRA, income tax on rental income is due to rise in 2027 and all rental properties will be expected to achieve an EPC C rating by 2030. While improving the energy efficiency of homes in the rental sector is a positive aim, owners of lower-rated homes must now start to weigh up the cost of upgrading. Landlords will need either to bring a property up to the required standard or spend at least £10,000 trying to do so. For individual and ‘accidental’ landlords in particular, this is a substantial commitment and may lead some to reconsider their portfolios. Larger landlords are better placed to absorb these costs through economies of scale, while most major Build-to-Rent schemes are newer and already have stronger EPC ratings.

Uncertainty in the sales market may also sustain rental demand. With conflict in the Middle East continuing and mortgage rates volatile, some prospective buyers are likely to delay a purchase and remain in rented accommodation for longer.

Against this backdrop, rents are expected to continue rising at a modest pace. However, the outlook will remain uneven, shaped by local supply constraints and the limits of tenant affordability.