The sharp slowdown in Britain’s rental market may be beginning to level off, offering cautious optimism for investors after more than a year of cooling growth.
Data from Hamptons, part of Connells, shows that the average rent on a newly let home across Great Britain fell by 0.2 per cent in the year to January 2026, leaving the typical monthly rent at £1,366.
While this marks a second consecutive annual decline, the pace of falls has moderated significantly compared with the sharper downturn seen through much of 2025.
By contrast, tenants renewing their contracts continued to see increases, with renewal rents rising 2.8 per cent year-on-year to £1,305 per month. Excluding London, renewal rents across Britain climbed 5.2 per cent to £1,070, underscoring the ongoing divergence between new lets and existing tenancies.
The moderation in rental growth has been largely driven by the South of England, particularly London.
Inner London rents have now declined for 13 consecutive months, while Outer London has seen eight months of annual falls. In January, new rents in Inner London dropped 1.7 per cent to £2,729 per month, with renewals down 2.2 per cent.
Across Greater London as a whole, new lets fell 1.3 per cent year-on-year to £2,283, while renewal rents declined 1.5 per cent to £2,222 — making the capital the only region where renewing tenants are paying less than a year ago.
The South East has also recorded four consecutive months of annual declines, with new rents down 1.6 per cent to £1,445. The East of England and South West saw minimal growth of 0.8 per cent and 0.5 per cent respectively.
Together, London and the South account for roughly a third of Britain’s rental stock, meaning their performance has an outsized impact on national figures.
Elsewhere, rental growth has proved more resilient, though the pace has eased compared with the rapid increases of recent years.
In the North West, new rents rose 3 per cent year-on-year to £1,031, while renewal rents jumped 7.2 per cent to £921. The West Midlands saw 2.4 per cent growth in new lets, and the North East 1.7 per cent.
However, Yorkshire and the Humber has now recorded six months of falling new rents, down 1.4 per cent in January to £915.
Scotland also saw newly agreed rents decline annually for the first time since July 2020, falling 0.2 per cent to £1,018. The shift reflects the unwinding of sharp increases that followed rent controls introduced by the Scottish government between 2022 and April 2025, during which annual growth averaged around 10 per cent.
Across Great Britain as a whole, new rents have now run below 1 per cent annual growth for several months, suggesting the market is adjusting after a prolonged period of rapid inflation.
For investors, the data signals that while headline rental growth has cooled, particularly in the capital, renewal increases remain robust outside London. That may help stabilise yields even as new let pricing softens.
Whether the moderation turns into sustained recovery will depend on tenant demand, affordability pressures and the evolving regulatory environment. For now, the rental market appears to be entering a more balanced phase after several years of exceptional volatility.
