UK Rents Set to Rise 5% on Falling Supply
Rental prices are accelerating as the number of available homes drops, forcing more buyers into the rental market due to higher mortgage costs.
UK rents are projected to climb by 5% by the end of the year. This marks a sharp reversal from the slower growth seen in 2024 and 2025. The primary driver is a significant reduction in housing supply. According to data from GN auto markets/housing: rental market, the number of homes available for rent has fallen by 3% compared to last year.
Current average rent stands at £1,340 per month. Year-on-year growth has accelerated to 2.6%, up from a low of 1.6% in February 2026. Demand has surged as mortgage rates rise, pushing first-time buyers away from purchasing. These individuals remain in the rental sector for longer periods, increasing competition for limited stock.
Supply Decline Drives Competition
The rental market saw a three-year recovery in supply that ended in May 2026. Listings in August were down 6% from the previous year. This scarcity has intensified competition among tenants. The number of enquiries per UK rental listing is now 6% higher than a year ago.
Enquiries per listing have reached 5.3, the highest level in 22 months. Landlords face fewer options to adjust prices due to reduced inventory. New investment in rental stock remains muted. Higher operating costs and increased regulation continue to deter landlords from adding units to the market.
London Faces Highest Pressure
London experiences the most acute imbalance between supply and demand. Rental growth in the capital has jumped to 2.9%, up from 1.7% a year ago. The number of homes for rent in London has dropped by 6%. In contrast, national average supply has fallen by 3%.
Higher mortgage rates impact London buyers more severely than those in other regions. The average London buyer now needs an extra £35,500 for their deposit. This amount is nearly double the £18,200 required nationally. Consequently, demand for rented homes in London is significantly stronger than in the rest of the country.
Regional Variations in Growth
All UK regions registered positive rental inflation in July 2026. Yorkshire and Humberside also saw a sharp increase in rental growth. Supply in this region dropped by 12%. These areas show a direct link between falling supply and rising prices.
Wales presents a contrasting trend. The number of homes for rent in Wales increased by 7%. This added supply has led to the sharpest slowdown in rental growth across the UK. The data suggests that higher rental inflation is driven by scarcity rather than broad demand shifts, as similar trends appear in Scotland where the Renters Rights Act does not apply.
