Rent Rises Now Lag Behind Inflation and Wage Growth: What London Landlords Need to Know

Context: Rent Growth Cooling Below Inflation and Wages

According to data reported by Landlord Today, rental prices across the UK increased by 2.4% year-on-year in January 2026. This is a notable deceleration compared to previous years and, importantly, it now sits below the current rate of inflation and average wage growth. While the specific inflation and wage figures vary regionally, the Bank of England's latest data indicates inflation around 3.5% and average wage growth near 3.0% for the same period.

For London landlords, where rental markets have traditionally been tight with above-average rents, this change signals a subtle shift in market dynamics. Rent increases that lag behind inflation and wages can affect rental yield calculations, tenant affordability, and competitive positioning.

Why This Matters to Different Landlord Profiles

• Single-Unit Landlords: With smaller portfolios, these landlords may find that rental income growth is not keeping pace with rising costs such as maintenance, energy efficiency improvements, or mortgage interest rates. This underscores the importance of careful budgeting and cost control.

• HMO (House in Multiple Occupation) Landlords: HMOs often benefit from higher total rental income but may face increased operational costs and regulatory compliance expenses. Slower rent growth could tighten margins, so reviewing operational efficiencies and tenant mix is critical.

• Portfolio Landlords: Larger portfolios might absorb short-term rent growth slowdowns but should consider the impact on overall yield and cash flow forecasts. Portfolio-wide rent reviews and benchmarking become essential to maintain profitability.

• Accidental Landlords: Those who rent out a property occasionally or as a fallback may need to reassess their rent expectations and ensure rents remain competitive to avoid prolonged void periods.

Practical Steps for Landlords

1. Review Current and Planned Rent Adjustments: Perform a detailed comparison of your current rents against local market data. Tools such as the UK’s Valuation Office Agency rental reports or platforms like Rightmove and Zoopla can provide city- or borough-level benchmarks. If your rents are significantly above market, consider pausing or adjusting planned increases to avoid tenant turnover.

2. Communicate Transparently with Tenants: When discussing rent changes, clearly explain how recent inflation and wage trends affect affordability. Highlighting that rent increases are below inflation and wage growth can reassure tenants and support positive landlord-tenant relations.

3. Monitor Economic Indicators Regularly: Set a quarterly reminder to review inflation rates, wage growth statistics, and regional rental market trends. The Office for National Statistics (ONS) and Bank of England provide reliable updates. This will help you anticipate when rent increases might reasonably resume above inflation.

4. Assess Property Operating Costs and Efficiencies: With rental growth slowing relative to costs, scrutinise your expenditure. Energy efficiency improvements, such as installing better insulation or smart meters, may reduce running costs and improve tenant appeal.

5. Plan for Long-Term Strategy Adjustments: Consider diversifying your portfolio or investing in properties in areas with stronger rental growth if your current location shows stagnation. Alternatively, explore adding value through refurbishment or amenity improvements to justify rent premiums.

What to Avoid

• Avoid aggressive rent increases: Given the current market, pushing rents above what tenants can afford risks higher void periods and turnover costs.

• Don’t ignore tenant feedback: Open dialogue can uncover issues that, if addressed, improve retention even without large rent hikes.

How Rentals & Sales Can Support You

Our team offers tailored portfolio reviews, compliance audits, and pricing strategy consultations designed for London landlords. We help you interpret market data, benchmark rents accurately, and implement workflows for regular rent reviews. If you’re managing HMOs or larger portfolios, we can advise on operational efficiencies and tenant engagement strategies.

Contact us to schedule a consultation and ensure your rental business is positioned for sustainable success amid changing market conditions.

Disclaimer: This article provides general information and should not be taken as legal or financial advice. Landlords should consult relevant professionals regarding specific circumstances.