UK Rental Market 2026: Slower Growth, Bigger Changes

The UK rental market stands at a turning point in early 2026. Cooling demand, new legislation, and regulatory pressures are creating a complex environment for landlords, tenants, and investors. Here's a breakdown of the key trends shaping the sector in the months ahead.

Rents Cool as Growth Slows

After a period of rapid increases, rental growth is moderating. Average rents in England stood at £1,214 in December 2025, marking a 2% year-on-year growth and the lowest monthly average in nine months. While this suggests some relief for tenants, the dip from summer highs also raises questions about sustainability for landlords.

Notably, void periods (the time a property is empty between tenancies) averaged 23 days, slightly longer than last year. This indicates properties outside urban hot spots may need better pricing strategies and presentation to remain competitive.

Regional Shifts in Rental Prices

Market softness isn’t spread evenly. December 2025 saw:

A 4% rent decline in the South West, the sharpest monthly fall across regions.
A marginal 0.3% increase in the North West, reflecting more resilient demand.

These regional differences underline the importance of localised strategies for both letting agents and investors.

2026 Rental Market Forecast

Experts forecast rents will rise by a modest 2-2.5% in 2026, down from double-digit highs in recent years. This cooling is attributed to:

Decreasing tenant demand
Falling net migration
Boosts in homeownership
A gradual rebalancing of supply and demand

However, the spectre of landlord exits—spurred by mounting regulation—could constrict supply again later in the year, putting upward pressure on rents.

The Renters’ Rights Act 2025: Major Shake-Up Incoming

Perhaps the most significant change this year is the introduction of the Renters’ Rights Act 2025 (RRA). This landmark legislation will roll out in phases starting 1 May 2026:

Phase 1 Highlights:

Section 21 'no-fault' evictions abolished: Landlords must use Section 8 grounds for possession.
Assured tenancies replaced with periodic ones: Signalling the end of fixed-term tenancies in most cases.
Rent increases limited to once every 12 months: With two months' notice and the right for tenants to challenge excessive rises via the First-tier Tribunal.

Later Phases (Late 2026 Onward):

National PRS Database and Landlord Ombudsman
Decent Homes Standard implementation
Awaab’s Law to improve housing safety standards

These changes collectively aim to bolster tenant security and housing quality, but they also introduce new administrative and compliance pressures for landlords.

Additional Regulatory & Tax Considerations

The Making Tax Digital regime expands to cover more landlords, requiring digital income tax submissions.
Uncertainty persists around energy efficiency legislation—a concern that continues to linger for the buy-to-let sector.
The government will release new approved tenancy agreement formats in January 2026.

Note: Purpose-Built Student Accommodation (PBSA) is exempt from these tenancy reforms, maintaining fixed-term capabilities under approved codes.

Opportunities Amid Transition

While regulation increases complexity, it may also open up buying opportunities. Winter rent softness (a £31 monthly drop on average) presents a better entry point for investors looking to acquire property before the traditional summer peak in tenant demand returns.

Moreover, younger renters remain active in the market, offering some reassurance of ongoing demand—especially in well-located, high-quality properties.

Final Thoughts: A Year of Caution and Opportunity

2026 is shaping up to be a pivotal year for the UK rental sector. Slower price growth and extended voids urge landlords to adapt their strategies, while sweeping legislative reforms demand careful compliance. Yet, for informed investors and proactive landlords, this could also be a time to consolidate, upgrade portfolios, and focus on delivering high-quality rental experiences.

Staying ahead of the curve—through awareness, adaptability, and expert advice—will be crucial in navigating the evolving rental landscape.