Migration falls, and home ownership increases, but supply constraints continue to underpin steady price rises.
Despite the many tax and regulatory headwinds, Britain’s private rented sector is moving into a calmer, more predictable phase after a prolonged period of high inflation, as tenant demand cools and conditions in the lettings market begin to ease.
Rents are forecast to rise by between 2 and 2.5 per cent this year, a sharp deceleration from recent peaks, reflecting a narrowing, though not elimination, of the gap between supply and demand.
Tenant demand: moderating but still above pre-pandemic levels
Data from the Office for National Statistics shows private rents continued to rise through late 2025 but at a decreasing rate, while average marketing times were longer than those seen in 2023 and 2024 as more rental homes came onto the market.
Zoopla expects this cooling process to continue, with rents for new lets to rise by around 2.5 per cent in 2026 as the balance between supply and demand edges closer to long-term averages.
And Savills is predicting very similar levels of rental growth at around 2 per cent in both 2026 and 2027 as incomes and supply patterns evolve. Fellow estate agent, Leaders, is the most optimistic at 3 per cent nationally, but lower in London.
Net migration and homeownership trends to be a big influence
There are two big structural changes that are likely to have an impact on the rental sector this year. The first is that Government figures show net migration has been falling sharply. The resulting slowdown in population inflows is expected to ease some of the pressure that drove extraordinarily high rental demand over the last decade.
Secondly, falling mortgage rates and improved access to finance, along with modest house price rises, have led to considerable improvements in the prospects of first-time buyers. The number of people purchasing their first homes has been rising and is likely to accelerate in 2026, moderating demand for rental properties as they exit the sector.
Supply remains constrained relative to long-term norms
Even though rental stock has been increasing recently, the overall level of supply remains well below long-term norms, with estate agency data indicating that the number of homes available to let still has some way to go before it catches up with the pre-pandemic levels of 2020. At the same time, the increasing number of new households being formed is absorbing many of those gains.
Tax and regulation likely to influence supply decisions
Alongside these shifts in demand and supply, landlords are adjusting to a more demanding regulatory and tax environment, with several major changes coming into force in 2026.
These include the introduction of the Renters’ Rights Act from May, the expansion of Making Tax Digital for income tax, and ongoing uncertainty around future energy efficiency requirements for rental homes. Together, they increase costs, administrative burdens and operational complexity for landlords.
Industry bodies and market analysts expect some landlords to sell in response, particularly those with smaller portfolios or lower-yielding stock. Where this happens, it is likely to reduce the number of homes available to rent, placing renewed pressure on supply in some areas and pushing up the yields for those that remain.
In many cases, properties sold by landlords move into owner-occupation rather than remaining in the private rented sector, limiting the extent to which cooling demand translates into a meaningful increase in rental availability.
The scale and timing of any exodus, however, remain uncertain. Some landlords may choose to sell ahead of the changes, while others may simply adapt, with past reforms suggesting that initial concern does not always lead to a widespread withdrawal from the market.
How this eventually pans out will be a key factor for both rental supply and yields in 2026.
