Rents continue to grow across the prime markets, although increases are stronger in markets most impacted by the Renters’ Rights Act.
Jessica Tomlinson, Associate Director, Savills Residential Research
Rental growth across the prime markets continued over the second quarter of the year, as landlord expectations for rental growth increased after the implementation of the Renters’ Rights Act (RRA).
In that three-month period, South West London, the South West & Cotswolds, and the Regional Towns & Cities were the top performers. These areas reported quarterly growth of between 1.6% and 1.9%, as seasonal demand put additional pressure on rents.
However, they show more variable levels of annual rental growth. By this measure, the markets of South West London stand out as the strongest performer, with needs-based demand for both flats and houses across the likes of Battersea, Putney and Wandsworth, supporting average annual rental growth of 3.6%.
Prime central London was more muted by comparison, as rents increased by 0.4% in the quarter. This leaves them a relatively modest 1.5% higher than a year ago. But here there has been a marked difference in rental movements between those properties above and below the £100,000 per annum threshold, which is one of the main factors affecting whether a tenancy falls within the scope of the RRA.
As evidenced by South West London, the more domestic outer prime London markets generally fared better. Here, rents increased by 1.2% over the second quarter on average, with annual growth reaching 2.5%. However, that annual rental growth at the end of June varied from 3.2% for properties let at less than £500 per week to 1.2% for those let in excess of £3,000 per week.
Meanwhile, across the prime regional markets, rents rose 1.3% in the quarter, adding to the 1.0% growth in Q1 that offset the pressure on rents seen in the second half of 2025. As such, annual rental growth has been entirely dependent on the growth seen in the past three months.
Across the commuter belt in particular, rental growth for prime properties has continued to be stronger for smaller homes and more subdued for larger properties with five bedrooms or more over the past 12 months. That has contributed to a marked divergence in longer term rental growth, that reflects the less uniform nature of demand for larger homes.
The RRA became law on 1 May. Although its potential impact has been discussed for some time, the second quarter is the first data point since implementation. As expected, and in line with trends over the past year, growth softened for higher-value properties, particularly those above the £100,000 per annum threshold where the RRA does not apply.
In prime central London, rents for properties below £100,000 per annum rose by 0.7% in the quarter. This compares with more modest growth of 0.1% for higher-value properties. At the very top end of the market, above £5,000 per week, average rents fell by 1.4% over the quarter. Here, tenants are typically far more discretionary and highly selective, favouring best-in-class homes.
A similar pattern was seen across outer prime London. Over the past year, rents for properties affected by the RRA increased by 2.7%, compared with 1.7% for those above the threshold. However, strong seasonal demand, particularly for family houses, meant properties with weekly rents between £2,000 and £3,000 still saw stronger growth over the second quarter.
Rental supply has been under pressure for several years. The implementation of the RRA prompted some landlords to test the sales market. However, weak market conditions have led to some stock returning to the rental market. And with a relatively uncertain short-term outlook, the majority of Savills agents expect stock levels to increase over the next three months.
This is reflected in growing evidence of a short-term misalignment in landlord and tenant rental expectations. A clear picture of where rents sit will become increasingly important, especially as tenancies reach the rent review stage. There is already emerging evidence of landlords building in some headroom in asking rents to ensure that a true market rent is set at the beginning of a tenancy.
Our recent client survey shows that much-discussed supply constraints will more fully play out over the longer term.
For landlords who remain committed to the sector, the corresponding rental growth should provide some upside to offset the increased regulation. Since March 2020, net growth has averaged 26% across outer prime London and 28% across the regional markets. In the next five years we are forecasting further rental growth of the order set out below.
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