BLOGS

The end of an era?

For the first time since 2017, rental price growth across Great Britain has effectively stalled. After years of double-digit increases that stretched tenant affordability to breaking point, the market appears to be catching its breath.

REalyse data tracking asking rents across England, Scotland and Wales shows a telling pattern: average asking rents fell month-on-month in November 2025 (-2.2%), December 2025 (-2.8%), and January 2026 (-1.3%). While spring 2026 has seen a modest recovery, this sustained period of negative growth marks a significant departure from the relentless upward trajectory that defined the post-pandemic rental market.

The question now is whether this represents a temporary pause—driven by seasonal factors and affordability ceilings—or signals a more fundamental shift in market dynamics.

A tale of two markets: regional divergence widens

Perhaps the most striking finding from our analysis is the dramatic variation in rental performance across UK regions. The traditional north-south divide is being redrawn, with northern markets continuing to show strength while southern regions cool.

The North East of England leads the pack with 9.2% year-on-year rental growth, followed by Yorkshire and the Humber at 6.5% and the North West at 6.1%. Wales also shows resilience at 6.0% annual growth. These regions benefit from a combination of relative affordability, strong tenant demand from workers priced out of southern cities, and—in many cases—yields that remain attractive to investors.

The picture in southern England tells a different story. London rents—averaging £2,766 per month—have grown just 3.5% year-on-year, a far cry from the 15-20% surges seen in 2022-23. The South East and East of England show even more modest growth at 1.7% and 1.6% respectively.

Most notable is Scotland, where annual rental growth has slowed to just 0.5%. The introduction of rent controls under the Cost of Living (Tenant Protection) (Scotland) Act 2022 and subsequent extensions appears to be weighing heavily on the market. Landlord exits and reduced investment have constrained supply, yet rents have stopped climbing—raising questions about whether regulated markets can achieve price stability without unintended consequences.

Supply constraints meet affordability ceilings

The stall in rental growth isn't occurring because landlord economics have fundamentally improved. On the contrary, the supply side remains challenging. REalyse data shows rental listing volumes fluctuating significantly month-to-month, with no clear upward trend in available stock.

What has changed is the demand side. Tenant affordability has hit a ceiling. With average asking rents now exceeding £1,600 per month nationally—and £2,750 in London—many households simply cannot stretch further. The Bank of England's base rate, while no longer at its 2023 peak, remains elevated by historical standards, keeping mortgage costs high and limiting first-time buyer activity. This should theoretically boost rental demand, yet the reality is that many would-be renters are doubling up, staying with family longer, or leaving expensive areas entirely.

Days on market data tells an interesting story. Properties are still letting quickly—recent months show averages of 18-30 days in many areas—suggesting demand remains robust. But the speed of lettings appears to be driven more by scarcity of affordable options than by tenants competing for premium properties at premium prices.

For landlords, the yield picture offers some comfort. REalyse analysis shows gross yields averaging around 6.2% nationally, with the North East delivering 7.4% and Scotland 7.2%. London, despite its high absolute rents, offers the lowest yields at 4.7%—barely covering mortgage costs for leveraged landlords in the capital.

Regulatory headwinds and the Renters' Rights Act

The market stall comes against a backdrop of significant regulatory change. The Renters' Rights Act, which received Royal Assent in 2025, is now being implemented across England. The abolition of Section 21 'no-fault' evictions and strengthened tenant protections are reshaping landlord-tenant dynamics.

While tenant advocacy groups have welcomed these changes, industry bodies report continued landlord attrition. The combination of higher interest rates, increased regulation, and now flattening rents is prompting some portfolio landlords to reassess their strategies. REalyse planning data shows build-to-rent developments continuing to come through the pipeline, but the pace of institutional investment has moderated compared to the frenzy of 2021-22.

Scotland's experience with rent controls offers a cautionary tale for those advocating similar measures in England and Wales. Despite capping rent increases, average rents in controlled areas have not meaningfully fallen—they've simply stopped rising while supply has contracted. The Scottish Government's consultation on permanent rent control legislation continues to divide opinion.

What next: pause or turning point?

The evidence suggests we're witnessing a pause rather than a crash. Several factors point to a 'soft landing' in the rental market:

Demand fundamentals remain strong. Population growth, constrained homeownership, and continued urbanisation underpin long-term rental demand. The structural shortage of housing across all tenures hasn't been resolved.

Supply isn't recovering. New housing completions remain below target, and landlord exits are offsetting new entrants. Without a supply surge, sustained price falls are unlikely.

Affordability is the binding constraint. Rents have stopped growing because tenants can't pay more—not because landlords are willing to accept less. Any improvement in household incomes or decrease in other living costs could unlock further rental growth.

For landlords, the immediate priority is realistic pricing. Properties priced at or slightly below market rate are letting quickly; overpriced stock is sitting. REalyse market data and comparables can help identify the sweet spot for each location and property type.

For tenants, the breathing space is welcome but unlikely to last. Those who can commit to longer tenancies may benefit from negotiating stability, while the supply constraints that underpin high rents remain unresolved.

Conclusion

The stall in rental price growth marks a significant moment in the UK housing market. After years of tenant hardship, the pause offers some relief—but it's a pause born of exhaustion rather than abundance. Until housing supply meaningfully increases, rents are unlikely to fall; they'll simply stop rising until incomes catch up.

For investors, the regional divergence creates opportunities. Northern markets offer stronger yields and continued growth potential. London and the South East face a more challenging period, with yields compressed and growth limited by affordability.

The rental market isn't broken—but it has reached a new equilibrium. Understanding local dynamics through granular market data has never been more important for landlords, investors, and letting agents navigating this evolving landscape.