Rents: Which way next?

Introduction

This post looks at current rental price levels in the PRS in comparison to the wider economy. Given the turmoil the sector has experienced over the last five years, is there any certainty about the direction future price levels may take?

Analysis takes in both a long run analysis of rental prices, as well as the most recent recent data as published by the ONS.

The conclusion of the research is that price responses may indicate a more fragmented market where landlords are responding to challenges in different ways. What may be emerging is a more fragmented, more complex PRS marketplace with the national headline figure for rental growth masking very different regional experiences.     

Part 1: The rental world before Covid-19

Chart 1 below shows annual private sector rental price inflation (as measured by the ONS in their Price Index of Private Rents – PIPR) in the years immediately preceding, and then during the peak of, the pandemic.

Whilst price data is published montly, information on the number of properties in the market is less useful - national data for England lags by several years, whilst in Wales there is no equivalent standard data set.

The paper focuses therefore on price response to the challenges landlords face. The chart below compares the growth in rental prices to the most reported measure of price growth in the wider economy - the Consumer Price Index (CPI).

The chart above shows rental prices rising alongside wider price inflation. Across the entire five-year period, average growth is near-identical. With an average growth of less than 2% per annum, it would have been fair to conclude the private rental market was more-or-less in equilibrium.

Further evidence of the stability during this period comes from data collected by the NRLA for its now-revised Landlord Confidence Index publication. In this period only a minority of landlords stated they typically raise raised rents.

(note 2019 qtr1 is the first time this data was collected).

Part 2: The Covid era - inflation awakens

Chart 2 replicates the analysis in the previous chart but looking at the covid and ‘post-covid’ period (there being no real “official” UK end date). The chart also includes the year 2020, as this calendar year straddled the arrival of the virus.

If pre-Covid was a period of market equilibrium, what came after has been market and price disruption whilst the market attempted to find a “new equilibrium.” A range of factors provided the kindling which helped light the inflationary fire:

• Supply chain crises.
• Labour shortages,
• Post-Brexit import-export adjustments,
• New commuting & work patterns.
• Pressure on courts and bailiff services
• Uncertainty about PRS reforms 

Many landlords use BTL finance, which typically links BTL finance to interest cover ratios as part of the Terms & Conditions of the finance. Thus, interest rate increases – most famously during the autumn and winter of 2022 - effectively poured oil on rental price fires:

Where are we now?

As context for the current analysis, at the time of writing, interest rates have come down on five occasions since their 5.25% plateau reached during Summer 2023-Summer 2024. Chart 3 below shows current annual CPI and PIPR data: 

The chart shows the annual rate of private rents (PIPR) tumbling through 2025 until October: This doesn’t mean prices are falling but rather increasing by a smaller percentage.

This analysis takes a twelve-month view in comparing prices: so, in September 2025, rental prices were 5.5% higher than twelve months before.

But what are happening to prices now? The chart below shows quarter-by-quarter how much rents are rising (compared to the wider economy) in the here and now – the calculation being from the beginning to the end of each quarter.

This chart shows price increases in the CPI have been relatively modest - apart from the two first-quarter periods of both 2024 and 2025. During 2025, there has been a closer alignment between rental increases and the wider price indicator, BUT the most recent quarter (Jul-Sep) has seen a noticeable leap in rents compared to the CPI.

The key question is this: Is the most recent jump in rents a one-off..or the start of a sustained “next leg” of rental price increases?

A more local analysis

Chart 5 compares rental price trends in England to those in Wales. Regular followers of the NRLA’s research will be aware that rental prices in Wales have regularly been growing at a faster rate than in England. Since September 2022, the annual growth rate of private sector rents has been higher in Wales than England in 26 out of the last 37 months.

The chart shows that, in Wales, rental growth has been falling steadily – but not uniformly. A quick comparison with Chart 4 (which is UK-focused) shows rental change in England being more closely aligned with the UK-wide pattern: different factors are driving rental price change in England from those driving change in Wales.

For example, in Chart 5, rental price growth in England is identical to the UK-wide increase for the most recent quarter (0.8%), furthermore in both the UK and England, this is a rise from the 0.7% growth in the previous quarter. In Wales meanwhile, the rate of increase has continued to fall - down to just 1% in the most recent quarter.

In Wales there has already been a period of regulatory reform: and it is not difficult to hypothesise that the sector in England is about to enter a Wales-style shake-up. Will the pattern of price growth experienced in Wales, be replicated in England?

Looking more carefully at how rental prices have risen across the country during 2025, Chart 6 below shows how much private rents have so far grown this calendar year:

This chart shows how, so far in 2025, rental price growth has lagged behind the CPI at a UK-wide level and also at an all-England level.

Across most regions of England – and Wales as a whole – rental price growth in the regions is ahead of the UK/England level. (There is no equivalent data set which presents trends in individual sub-regions of Wales.)

In London however price growth is right at the bottom of the range, and well below the England/UK averages. Also, towards the bottom of the range is the South-East of England. London and the South-East account for more than one-in-three homes in the PRS, and so slow rental price growth in this part of England must be a significant factor in the decrease in both England and the UK in its entirety.

This final chart compares two regions – London and the North-West (the latter of which accounts for over 500,000 PRS dwellings – just under 12% of the sector in England):

This chart underlines the dramatic change in rental growth London has experienced during 2025: rental growth essentially falling off a cliff in Quarter 1 and Quarter 2. In the most recent quarter however rental growth was two-thirds higher than in quarter 2 – albeit from a [very] low base.

In the North-West meanwhile, quarterly rental increases have fluctuated around a mean increase of around 1.4% over the same periods with no real discernable upward or downward trend.  

In conjunction with Chart 6, what this data shows is that the slowdown in rent increases hasn't just been led by the London/South Eastern rental market, the national analysis of rents in 2025 has been driven by the slowdown in these two regions.  Chart 7 however shows the more recent, modest, recovery in rental prices is being driven by Wales and English regions outside of the London/South East "mega-region".   

Summary

The PRS rental market in England & Wales has two distinct periods. The first period predates the arrival of Covid-19 to these shores. This period was typified by slow rates of rental growth. Before the pandemic rent increases balanced out with wider price inflation in the medium term. NRLA research highlights only a small proportion of landlords increasing rents during this period.

The second period – to date – has been about finding a new equilibrium. Changes in the market (for example the increase in Build to rent), labour market changes (e.g. the impact of changing commuter patterns) as well as regulation change have combined to create disruption in the sector.

Nowhere is this more clear than in the London and (to a lesser extent) South-East regions. Here price in the PRS (i.e. rent) is currently playing a different role to that in other parts of England & Wales.

A combination of many factors helps to explain this rapid reduction in rental growth in these two regions: Price exhaustion, falling interest rates – reducing Interest Cover Ratio pressures – and an added desire among many landlords to retain good tenants through this period of change are uppermost in that list. Also featuring are longer-term changing dynamics in the labour market, patterns of immigration and internal net migration to these regions, and, finally, changes in student volumes and work-life patterns. 

Such is the size of the PRS in two regions (London and the South East), the impact of the above factors in these specific regions is having a distorting effect on the analysis of the national picture.

A fragmenting PRS?

Analysis indicates that, at present, three private rental markets: In Wales, legislative change has already prompted landlord exit (see their data dashboard) and a reduction in property supply across most (but not all) local authority areas outside of Cardiff and Swansea. This data is far from perfect but represents the best available and clearly shows the supply impact of policy change.  

Secondly, most (geographically) of England. Here rent growth is continuing to climb at rates above wider price metrics - growth which is part-masked by the drop in London & the South East. This climb could be a repeat of the pattern experienced in Wales - a fall in supply and the number of independent landlords accompanied by sustained rent increases.

Finally, London & the South East - where a different market experience is taking shape, with the growth in rents rapidly declining during 2025. In London and the South East it may landlords are pursuing a different strategy. In these two regions, the hypothesis/theory of change would run as follows: The rapid growth in rents experienced during 2024, may have led to a temporary 'rent ceiling' being in place while wages catch-up. At present, landlords are "hunkering down", minimising rent change to retain good tenants (as was the norm pre-Covid) in preparation for forthcoming reforms. 

What may be emerging is a more fragmented, more complex PRS marketplace with 'headline' rental growth masking more nuanced patterns of rental growth between regions. Future 'hotspots' of rental price growth may not be in those areas most expected. In the meantime the national headline figure for rental growth is masking very different regional experience.