Figures from the Office for National Statistics (ONS) showed the rate of rental growth was higher than the 3.3% uptick seen in the year June. The ONS attributed this rise to higher rents in London, which rose to its highest rate in 10 months.
London no longer has the slowest rental growth
Average rents in London rose 3% year-on-year to £2,317, up from 2.2% last month, remaining the most expensive region to rent in England. This was also the first time since October last year that London did not have the lowest annual rise across England.
The South East took London’s place as the region with the slowest rental inflation, at 2.9% to £1,419. This was up from 2.3% in the year to June.
The North East continued to have the highest rent annual inflation rate of all English regions, rising 6.3% to £783. This growth was flat on the rate recorded in the 12 months to June.
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Rental growth slows in Wales
Wales was the only nation to record a slowing in annual rent inflation in July, with the average monthly rent rising 4.5% year-on-year to £843, down from 4.9% in the year to June. This was also notably lower than its most recent peak of 8.9% in March last year.
In England, average rents rose 3.8% annually to £1,451, up from 3.4% the month before.
Average rents in Scotland came to £1,016 per month, a 1.7% yearly increase. This was higher than the 1.3% growth recorded in the year to June and the second month running for rent increases in Scotland, following nearly three years of generally slowing annual inflation.
The ONS said this was due to strong price growth over May and July, compared to weaker growth last year.
In Northern Ireland, the average monthly rent for a new let was £875 in May, the most recent month on record. This was 2.3% higher than the year before and lower than the 2.9% increase seen in the year to April. It was also the lowest inflation in over five years, following a slowing trend since April 2024.
Rental competition is heating up
Alex Upton, managing director for specialist mortgages and bridging finance at Hampshire Trust Bank (HTB), said the competition for good-quality rental property remained “intense” and was behind the rising rents.
She said, with the latest Propertymark report finding 98 prospective tenants for around 12 properties per branch, “that is a significant imbalance, and in many areas good rental properties simply do not stay available for long”.
Jeremy Leaf, North London estate agent and a former Royal Institution of Chartered Surveyors (RICS) residential chair, added that the rental data confirmed what his firm was seeing on the ground, “that demand remains strong, particularly for higher-end houses among those returning from holiday seeking accommodation before the new school term”.
Renters’ Rights Act altering supply
Upton said the Renters’ Rights Act had also changed the way landlords thought about their portfolios.
She added: “The landlords we work with are being much more strategic and moving beyond expansion for its own sake. Strong tenant demand does not automatically make every acquisition a good investment, and professional landlords are increasingly discerning about where they put their capital. We’re seeing more focus on which properties genuinely strengthen a portfolio, where income is more resilient and where there is a clear case for further investment.
“That shift towards more considered, professional investment is positive, but it cannot make up for a shortage of rental homes. That means creating the conditions in which landlords have the confidence to keep investing while standards continue to rise across the sector. Unless we address supply as well as standards, renters will continue to compete for too few homes, and affordability will remain under pressure.”
Leaf agreed, saying: “Rents have held firm invariably supported by a shortage of supply. Some landlords are still selling due to Renters’ Rights Act and tax concerns and those staying are insisting on better quality references, just in case possession is required. We have also noticed more activity prompted by some tenants taking advantage of new rules rather than remaining in a fixed-term arrangement.”.
Tom Bill, head of UK residential research at Knight Frank, said rents were being pushed higher as the “unintended consequences of the Renters’ Rights Act play out”.
Bill added: “Some landlords have left the sector, which has reduced supply, while others have increased asking rents to reflect the additional financial risks they face. The consequences may be unintended, but they were not unexpected, and a policy designed to tip the balance of power towards tenants is adding to the financial pressures they already endure.”
