The average monthly rent in Great Britain fell by 0.4% to £1,387 in the year to August. This is the joint second-largest decline since the launch in 2011 of the Hamptons Lettings Index, and the most substantial drop since the end of the pandemic.
The slowdown suggests that the rental market is recalibrating. Demand has softened, down 4% over the past year. Meanwhile, there are 8% more rental homes on the market than in Summer 2024.
The stock of properties may still be lower than in 2019; in July, there were 21% fewer homes available than six years ago. But in August, there were 16% fewer. As a result of this increase in supply, landlords are being forced to adjust their expectations to attract tenants.
Inflation in August, as measured by the CPI, rose to 3.8%; overall housing costs made up close to a quarter of the increase. But the pace of rental growth has been lower than the overall rate of inflation for the past nine months. This is good news for tenants who have endured steep increases in recent years.
"Over five years, air fares have soared by 84%. On this basis, the average rent would be £1,934 pcm. Water bills are 61% more expensive than in 2020. If rents had moved in line with the trends in this household bill, the average would be £1,601. "
It should also lessen the headache for policymakers at the Bank of England. Rising rents have been one of the bigger reasons why the Bank has not been able to meet its 2% inflation target.
In 2022 and 2023, rents were some of the fastest-rising components of the Consumer Prices Index (CPI) and, indeed, over a five and ten-year period, the increase in rents has outpaced the overall rise in the cost of living.
Since 2020, rents have gone up 35%, against 28% for the CPI. Over 10 years, rents have jumped by 51%, compared with inflation, which has leapt by 38%. If rents had tracked inflation since 2020, the average rent would now be £1,308 pcm, saving £952 a year for tenants. This saving would be £1,611 if rents had followed the direction of inflation over 10 years, giving an average monthly rent of £1,253.
Tenants may feel aggrieved about the spiralling rents. But if rents had moved in line with the cost of some everyday services and goods, the financial burden would be even greater.
Over five years, for example, air fares have soared by 84%. On this basis, the average rent would be £1,934 pcm. Water bills are 61% more expensive than in 2020. If rents had moved in line with the trends in this household bill, the average would be £1,601.
There are some regional variations in the performance of rents, with declines in four regions; London, the North East, Yorkshire and the Humber and Wales. Elsewhere, rents continue their upward path, albeit more slowly than before, with tenants in the Midlands paying at least 2% more year-on-year.
The sharpest fall has been in London, where rents have been moving lower for eight consecutive months. The overall average decline in the capital is 3.3%, but Inner London rents tumbled by 5.8% which was the most sizeable fall since May 2021. The average rent in Inner London is now £2,729 pcm.
Over the last five years, London rents have risen exactly in line with inflation, at 28%. Only here and in Wales has rental growth not outpaced the cost of broader goods and services.
Meanwhile, the average cost of renewing a rental contract rose by 4.3% in the year to August 2025. Nevertheless, it continues to be cheaper for a tenant to renew an agreement rather than seek a new tenancy, although the difference has narrowed to £90-a-month, against the peak of £170 in October 2023. Pre-pandemic, renewing an agreement was £10 - £20 less expensive.
In the months to come, as affordability pressures mount, we expect the growth in the cost of renewing a contract to slow.
