Landlords will need to carefully navigate the challenges of tenant affordability after the latest ONS figures for rental growth and inflation were released yesterday.
This will make the correct pricing of rents crucial going forward, particularly ahead of the Renters’ Rights Act coming into force on May 1.
UK monthly rental prices increased by 3.4% to £1,377 in the 12 months to March 2026, according to the ONS. However, the number is down from 3.6% for the 12 months to February 2026. Inflation, meanwhile, rose to 3.3% for the 12 months to March, up from 3% in the twelve months to February.
However, neither set of figures yet reflects the full economic impact of the war in Iran, which is yet to filter through fully to inflation and other market measures.
Nicky Stevenson, managing director at Fine & Country, said: “These figures relate to a period before some of the more recent cost pressures and volatility in everyday bills fed into household budgets, so it will be important to see how the next few months play out for confidence and affordability.”
Energy prices piling on pressure
Adam Hoyes, senior asset allocation analyst at Rathbones, said: “Headline UK CPI inflation reaccelerated in line with our expectations on the back of the Iran war, from 3.0% in February to 3.3% in March. The increase was, unsurprisingly, an energy price story. Energy inflation jumped from -1.0% in February to +4.9% in March, almost entirely due to higher prices at the pump.
“Fuel prices have risen further since the March data were collected. Weekly government data show the average price of petrol up around 12% in April relative to March, while diesel prices are almost 20% higher.”
“That could add another 0.7 percentage points to headline inflation at the next data release, more than offsetting the downward pressure on inflation from the energy bill price cap, which was lowered by just under 7% in April. And the lower price cap is increasingly looking like it is only delaying the pain for households, given that it is likely to rise again in July.”
Hoyes said expectations were that headline inflation will ease to around 3% again in April but pointed out that before the conflict it was expected to be closer to the 2% target.
“The outlook for inflation and interest rates beyond April remains heavily dependent on developments in the Middle East and global energy markets,” he said.
Pressure on prices
Tom Bill, head of UK residential research at Knight Frank, says landlords could be forced to raise prices further to absorb the forthcoming changes of the Renters’ Rights Act, as well as take into account additional inflationary pressures.
“Although rental value growth has been declining, the Renters’ Rights Act could increase upward pressure on rents as landlords mitigate higher risks around repossessing their property or guaranteeing rental income,” he said.
Alex Upton, managing director, specialist mortgages and bridging finance at Hampshire Trust Bank, said: “Rental growth has slowed from the peaks seen over the past two years, but the underlying pressure has not gone away. Demand continues to outstrip supply in many parts of the market, particularly for well-located and better-quality stock, and that imbalance is likely to persist while delivery of new housing remains below what is needed.”
