Prime rents surge as landlords navigate Renters' Rights Act and rising costs

Prime Rental Market Accelerates Despite Regulatory Pressures

Prime rental values continued their upward trajectory during the second quarter of 2026, with landlords increasing rents to offset rising borrowing costs, taxation and the impact of the Renters' Rights Act (RRA). According to Savills' latest prime rental indices, rents increased by 1.3% across prime regional markets and by 1.2% in outer prime London during the three months to June, whilst prime central London recorded more modest quarterly growth of 0.4%.

The strongest rental growth was concentrated in more domestic South West (1.6%) and West London (1.4%) markets. Neighbourhoods including Fulham, Chiswick and Wandsworth experienced the most significant upward pressure on rents, reflecting broader supply constraints and changing landlord strategies across the capital.

The Renters' Rights Act Effect

A notable pattern has emerged in rental growth across London, with properties falling within the scope of the RRA experiencing sharper increases than those above the regulatory threshold. In prime central London, rents for homes below the £100,000 per annum threshold rose by 0.7% in Q2, compared with just 0.1% for higher-value properties. This disparity was even more pronounced across outer prime London, where rents for RRA-affected properties increased by 2.7% over the past year, compared with 1.7% for those above the threshold.

Jessica Tomlinson, research analyst at Savills, explained the landlord perspective: "Landlords are continuing to adapt to a changing regulatory environment following the introduction of the Renters' Rights Act, while also contending with higher mortgage costs and an increased tax burden. As a result, many are reassessing rental values across their portfolios to help offset rising operating costs."

The research revealed that almost half (48%) of Savills agents in London cited the RRA as the biggest concern of their landlord clients, with this figure rising to 71% outside the capital. The abolition of Section 21 was most frequently cited as the key issue driving landlord concerns. Significantly, approximately half of all landlords were actively considering reviewing their rental values, suggesting further upward pressure may be forthcoming.

Market Sentiment and Future Outlook

Agent feedback highlighted a stark divergence between landlord and tenant expectations. Some 82% of London agents reported that landlords expected rents to increase, compared with just 30% of tenants holding the same view. This sentiment gap underscores the confidence among property owners that the regulatory and cost environment will continue to support rental growth.

In prime regional markets, the 1.3% quarterly rent increase built upon the 1% growth recorded in Q1, reversing the downward pressure observed in the second half of 2025. Growth was led by the South West and Cotswolds, alongside regional towns and cities, all reporting quarterly growth of between 1.7% and 1.9%.

Looking ahead, Savills forecasts rental growth of between 6% and 13% across prime markets over the next five years, supported by constrained housing supply. The research also noted that the RRA has prompted some landlords to test the sales market, further reducing available stock and providing additional support to rental valuations despite prevailing economic headwinds.

For buy-to-let investors, these trends suggest that strategic property selection remains crucial. Monitoring planning alert tool activity can help identify emerging growth areas, whilst understanding R2SA hotspot tool dynamics will be essential as the regulatory landscape continues to evolve.

Source: Property Industry Eye.