London rents are rising as property values fall

We are witnessing something interesting in London's housing market.

Whether you own your home, rent, or if you are a property investor letting out, the market feels different.

The latest figures from the Office for National Statistics show that London rents are beginning to accelerate again. They have risen by 3.0% over the year to July.

Meanwhile, the average London property’s value fell by 2.5% over the year to June – the latest datapoint available.

There is a growing divide between the UK's sales and rental markets.

For existing landlords, this means their asset value is falling, but gross returns are increasing.

For potential landlords, it means that yields are improving, and the further that property values fall, the more accessible they become.

TL;DR - Some key figures about the London Lettings Market in 2026:

Average London rents rose 3.0% year-on-year in July 2026
Month by month, that is up from annual growth of 2.2% in June
The average London rent has reached £2,317 per month according to revised ONS data (as of 21 August 2026)
At the same time, average London house prices are 2.5% lower than a year earlier
London has now recorded ten consecutive months of annual house price falls
For landlords, the figures underline the difference between capital growth and rental performance

London rental growth up but lags behind UK

Across the UK, the average private rent reached £1,393 per month in July 2026, according to the ONS.

That was 3.7% higher than a year earlier and represented an acceleration from 3.3% annual growth in June.

Interestingly, London had been experiencing the weakest rental growth in the country, region by region – but that has now changed.

July was the first month since October 2025 in which another region – the South East – recorded a lower annual increase.

It doesn't mean that rents are about to surge.

But it does suggest that the period of steadily slowing London rental inflation may have reached a turning point.

House prices are telling a very different story

Despite upheavals felt across the lettings sector over the past year, the rental market remains incredibly robust and active. Demand outstrips supply.

When it comes to the sales market, which guides property values, the picture changes.

Average UK house prices increased by 2.0% in the year to June, down from 3.0% growth a month earlier.

London, however, remained the weakest-performing English region.

Average prices in the capital were 2.5% lower than a year previously.

It is true enough to say that summer periods are typically slower and property market activity does routinely dip.

But that statement masks a reality: June marked the tenth consecutive month in which London house prices fell on an annual basis. Anecdotally, many agents feel that when ONS and Land Registry data catch up to reporting July and August, it will show 12 consecutive months of year-on-year price drops.

The ONS says much of that weakness has been concentrated in Inner London. It also points out that national comparisons are being affected by what happened around the Stamp Duty changes in April 2025, when transaction patterns and prices moved unusually sharply.

So we shouldn't interpret one month's figures as evidence of a dramatic collapse in London property values.

Nevertheless, there is clearly a difference between what is happening to rents and what is happening to sale prices.

Are rent increases good news for landlords?

Potentially – but context is needed.

Property investment has traditionally offered landlords two possible sources of return.

There is the income generated by the rent. Then there is the potential increase in the property's value over the longer term.

Those two things don't necessarily move together.

A landlord in South London could therefore own a property that has fallen slightly in value on paper over the past year while simultaneously seeing its achievable rent increase.

For somebody considering buying a rental property, lower purchase prices combined with higher rents change the yield calculation.

That doesn't automatically make every property a good investment. If you are looking for a rental opportunity, it is worth talking to an experienced lettings expert about your objectives. It could be stable and predictable rental income, it could be better capital growth, it might be something that will require very low maintenance, etc. It could come down to the market you want to target: students, medics, professionals, families?

There is a lot more to consider than simply rent versus bricks and mortar value.

Plus, it is important to factor in other things: mortgage rates, Stamp Duty, taxation, changing regulations and requirements (think potentially tightening EPC requirements, for example).

This is why judging a buy-to-let investment purely by the latest house price index misses half the picture.

Rental growth doesn't mean every landlord should increase the rent by 3%

There is another important distinction.

ONS rental figures aren't a recommended rent increase.

Nor do they mean that every property in London has increased in rental value by exactly 3%.

The ONS measure covers rental prices across a very large number of new and existing tenancies. Individual markets can behave quite differently depending on location, property type, condition, number of bedrooms and tenant demand.

A two-bedroom flat in Balham may be experiencing very different demand from a family house in Streatham, just as properties in Brixton, Tooting, Clapham or Wimbledon won't necessarily move at exactly the same pace.

This is why rent reviews should always begin with the individual property and the current local market rather than a national or London-wide percentage.

Particularly following the changes introduced under the Renters' Rights Act, landlords need to make sure that any rent increase is handled through the correct process.

Supply, demand and the Renters’ Rights Act

At first glance it might look like there is a simple economic story behind much of this.

People still need somewhere to live. More tenants than there are properties drives demand up, which drives rents up.

But at the same time, the Renters’ Rights Act has prohibited rents being accepted at above asking price.

Reports now suggest that some landlords, worried this could cause them to miss out on potential rent, are raising asking prices – something we have written about previously.

This may have artificially boosted rent prices ahead of natural inflation.

That appears to be part of what we are seeing now.

What should London landlords take from the figures?

Landlords should not assume that rents are "booming".

A 3% annual increase is considerably more moderate than the rental growth London experienced during the extraordinary post-pandemic period.

Nevertheless, after months in which rental inflation had been cooling, July's figures show growth accelerating again.

For existing landlords, this makes accurate rental valuations increasingly important. A tenancy that has gone several years without review could be significantly below the prevailing market rent – although retaining a good tenant and maintaining a sustainable tenancy should always form part of that decision.

For prospective landlords, a drop in capital values shouldn't automatically be interpreted as evidence that residential property no longer works as a long term investment.

The more useful questions to ask are:

What does this particular property cost, what could it realistically rent for, and what will it cost to own and operate?

Those numbers tell you considerably more than the latest London house price headline.

Perhaps that is the real lesson from the latest ONS figures.

Property prices do matter. But for landlords, they are only one part of the equation.

London house prices have now been falling annually for ten months, while rents have continued to rise.

One market currently looks relatively subdued, whilst the other remains remarkably resilient.

Both things can be true at the same time.

Are you thinking about your current rental investment?

If you own a rental property in South London and would like to understand how its current rent compares with the local market, speak to Your Home Managed.

We can assess the property, look at comparable local evidence and help you decide whether the existing rent remains appropriate. It isn’t about London averages or generalisations – it is about determining how your individual property compares, who it best suits, and how to achieve the best possible results from your investment.

Frequently Asked Questions about London Rent

How much have London rents increased in 2026?

According to the ONS, average private rents in London increased by 3.0% in the 12 months to July 2026, compared with growth of 2.2% in June.

What is the average rent in London?

The ONS recorded an average London private rent of £2,317 per month in July 2026.

Are London house prices falling?

Yes. Average London house prices were 2.5% lower in June 2026 than a year earlier. This was the tenth consecutive month of annual house price falls in the capital.

Does rising rental inflation mean landlords should increase rents?

Not automatically. London-wide statistics provide useful context, but an appropriate rent should be based on the individual property, its location, condition, size, comparable properties and current tenant circumstances.

Source: Office for National Statistics, Private rent and house prices, UK: August 2026.