UK Average Rent Inflation Over Time

In this post, we decipher historical rents in the UK to find out how much rents go up per year and what this could mean for the future.

Quick Summary:

From 1989 to 2023 annual rent inflation averaged around 3.71% in the UK

From 1989 to 2023 rent inflation has beaten general inflation by around 0.91% annually

In the last 10 years from 2013 to 2023, average rents have increased by around £569 (or 121%)

In the last 34 years from 1989 to 2023, average rents across the whole of the UK have increased every year

If rents increased by an average of 3.71% over the next 25 years, rents would be around 140% more than they are today

UK Rental Inflation Per Year

According to Trading Economics, rental inflation in the UK from 1989 to 2023 has averaged around 3.71% annually. 

The highest rate of rental inflation seen was 12.90% in April 1991 and the lowest seen was 0.3% in January 2018. 

However, we could see the highest rate of rental inflation soon as we’ve recently had over 10% annual rental inflation in August 2023. 

The promising thing (for landlords, but not tenants) is that there are no years since 1989 where annual rental inflation has been negative. If you look at the chart below there is not a single year where rental inflation is negative.

bar chart Annual uk rental inflation by year 1989 to 2022 (1)

This is as opposed to house prices which can have capital depreciation at times.

Key takeaways

  • The highest annual rental inflation seen up to August 2023 is 12.90% in April 1991. 
  • On average rental inflation is about 3.71% annually in the UK. 

How Much Do Rents Go Up Over 25 Years

If we use the stats from above and assume rents go up around 3.71% on average annually then we can work out what we expect rents to be in 25 years time.

Obviously, historical data can’t predict the future, but it’s the best estimate we can get.

Let’s start at £1,261 average rent per month based on Homelet’s August 2023 figures.

If rental inflation was 3.71% every year, then in 25 years’ time the average rent would have risen from £1261 to £3023 per month.

This is equal to rent being around 140% more than today.

This means in year 1 the annual rental income would be £15,132 and by year 25 the annual rental income would be around £36,276

This might sound ridiculous because the average wage in the UK is less than £3023 per month as of September 2023.

But keep in mind that wages also increase over time.

Here’s a table showing the breakdown.

graphic of a table showing how much rents go up over 25 years in the uk if rental inflation is 3.71% annually

Do Rents Always Go Up?

If you look at the country as a whole, average rents have gone up every year since 1989 as rental inflation has been positive.

But this is an average across the whole country.

Even at times of high rental inflation across the country, there are pockets where rental prices can be dropping instead.

So it’s important as a property investor to make sure you pick areas that have strong rental demand.

Although in the long run rents do tend to keep going up.

Do Rents Crash When House Prices Fall?

Not really.

When house prices fall rental prices don’t follow in the same way.

For example:

According to both Nationwide and Halifax house prices dropped by around 10% annually in August 2023, but in the same month annual rent inflation was up by around 10% according to Homelet.

This is partly because rental prices are more determined by existing mortgages on houses and the supply and demand for rental properties, not the current value of a house.

How Much Do Rents Beat Inflation By In The UK?

On average rental inflation beats general inflation by around 0.91% annually.

This is based on figures that annual rental inflation in the UK averages around 3.71% and the UK had an annual inflation rate averaging 2.8% from 1989 to 2023 (34 year period). 

Of course, at some points general inflation will be more than rental inflation, but over time rental inflation seems to beat inflation. 

The difference between the two types of inflation can also vary depending ont he economy and the rental market.

Key Takeaways

  • Over time rental inflation beats general inflation in the UK by about 0.91% annually, so rents in the UK are an inflation-beating form of cashflow. 

This is before you even consider that there is potential capital growth in properties too.

How Much Has Rent Increased In The Last 10 Years UK?

We’re writing this in 2023 so let’s compare rents to 2013. 

According to Statista, the average monthly rent payment for a home was £692 in December 2013

If we compare this to Homelet’s recent figures of rent being £1,261 in August 2023, we can work out the difference. 

Rent is on average £569 (or 121%) higher in August 2023 compared to December 2013.

You could see this period of rent inflation as above average because this is definitely above the long-term average of 3.71% annually since 1989. 

Average Rent Increase Per Year UK

Let’s look at how rents could go up based on different price levels and different rates of inflation. 

One thing to consider is that as a landlord you might not increase the rent every year, but instead after a tenant leaves or after every few years. 

If this is the case then the rent would increase more than the yearly average because you’re doing a few years’ worth of rent increases in one go. 

Here’s a table showing how much the monthly rent would increase if it went up by around 3.71% each year. 

It also shows how much rent would go up if there was a 2.5%, 5% or 10% increase.

graphic of table showing average rent increase for different rates of annual rental inflation
Table showing monthly rent increases for different rates of annual rental inflation

Further Reading

If you’re interested in following other important metrics you should read up on the history of UK interest rates as they heavily influence what landlords have to charge for rents.

You should also look at house price indexes as capital growth is another important part of the property investing puzzle.