London’s rental market is sending a clear message this week: rental supply is shrinking, while rents remain high.
Advertised rents across Greater London rose by 6.1% year on year in September, reaching an average of £2,448 per month. This was the fifth consecutive month of annual growth since the Renters’ Rights Act came into force on 1 May, although the pace has slowed from August’s 9.8%.
At the same time, smaller landlords are reducing their portfolios, selling up or leaving the market altogether. Some homes are being bought by larger professional landlords, but others are moving to owner-occupiers. That means the private rented sector is gradually consolidating, and the total supply of rental homes is still under pressure.
For landlords, this creates both an opportunity and a need for careful decisions.
What’s happening?
The latest figures come from several different measures, so it’s important to understand what they show.
Hello Neighbour’s September data recorded average advertised rents of £2,448, up 6.1% from September 2025. September’s average was also almost 13% above the level seen between January and April 2026.
However, advertised rents are not necessarily the rents that landlords achieve.
Across properties let between July and September, agreed rents were around 2.5% below the advertised figure. The broader gap between asking and achieved rents appears to be around 3%.
That difference matters. A property advertised at £2,500 per month may ultimately let for closer to £2,425, depending on its condition, location, presentation and the level of tenant demand.
Other measures sit lower:
- HomeLet’s September index recorded an average London rent of £2,272, up 3.3% annually.
- The ONS measure, which includes existing tenancies as well as new lets, showed London rents up 3.5% in the 12 months to August, with an average of £2,332.
- Zoopla’s September Rental Market Report showed London rental growth of 2.9%.
These figures are not contradictory. Advertised rents usually respond first when landlords set new prices. Existing tenancies tend to move more slowly.
Is supply shrinking?
Yes, particularly in inner London.
Zoopla reported that the number of homes available to rent in London was 6% lower than a year earlier, with supply in inner London down 13%. Across the UK, available rental stock was down 3%, while the flow of new homes coming to market fell by 6%.
That ends three years of gradually improving rental supply.
The pressure is also visible in the prime market. Knight Frank’s latest London lettings research shows that prime outer London rents rose by around 3% in the year to September, with growth of 2.3% over the last six months. New rental listings in prime outer London were down 6.4% in the year to August.
There were 8.9 prospective tenants for every new rental property in prime outer London over the three months to September. In prime central London, the figure was 5.6 tenants per property. A four-year high.
That said, tenant demand is not at its earlier peak. There were 34 enquiries per property in September, compared with 45 in September 2025 and 65 in September 2023.
The market is therefore not being driven by unlimited demand. It is being shaped by fewer available homes, combined with enough tenant demand to keep rents elevated.
Why are landlords selling?
Smaller landlords are facing several pressures at the same time.
The Renters’ Rights Act has changed how new tenancies operate. Landlords and agents must now advertise a fixed asking rent and cannot accept offers above it. Rents can generally be increased only once a year, and Section 21 has been abolished.
New lets are now Assured Periodic Tenancies, meaning they run on a rolling basis rather than having a fixed end date. If a landlord needs possession, they must rely on a valid legal ground and follow the correct process.
The government’s landlord guidance explains the changes in more detail.
These reforms do not make letting impossible, but they do make the relationship between landlord and tenant more important. Getting the wrong tenant in place can create more cost and uncertainty when ending the tenancy is slower and harder than before.
Borrowing costs are another pressure point. The average five-year fixed buy-to-let rate at 75% loan-to-value rose from around 3.88% in January to 4.7% in August, increasing the monthly cost for landlords refinancing mortgages.
For a highly leveraged landlord, even a modest rate increase can make a significant difference to monthly cash flow. Add maintenance, insurance, compliance work, tax and management costs, and the decision to keep a property may no longer feel straightforward.
The result is not a complete collapse of buy-to-let. A significant share of homes sold by smaller landlords is being absorbed by larger professional landlords. But the sector is becoming more concentrated, and some properties are leaving the rental market altogether.
What about rent controls?
Islington Council has declared a private renting crisis and is lobbying for powers to introduce rent controls and an emergency rent freeze.
This is a council lobbying position, not current law. Islington does not currently have the power to impose a borough-wide rent freeze, and the Housing Secretary has ruled out devolving rent control powers to London.
Landlords should therefore continue to follow the current national rules rather than make decisions based on proposed policies.
There is also speculation ahead of the Budget on 28 October, including possible changes to capital gains tax and National Insurance on rental income. These are not announced policies. Until the Budget takes place, landlords should avoid treating speculation as fact.
What should landlords do?
Price accurately
The advertised rent is now the most you can legally accept. That makes accurate pricing more important.
A high asking price may look attractive, but if it leads to long marketing periods, repeated negotiations or a lower agreed rent, the extra time can reduce your overall return.
Use recent local evidence, not just online asking prices. Comparable properties that have actually let are more useful than listings that remain available.
Choose carefully
With Section 21 gone and tenancies continuing on a rolling basis, tenant selection matters more than ever.
Thorough referencing, affordability checks and an honest conversation before move-in can reduce the risk of avoidable problems later. No process removes every risk, but getting the start of the tenancy right gives you a stronger foundation.
Protect your yield
When the agreed rent is below the advertised rent, every cost matters.
Look for fixed, transparent fees and ask whether maintenance mark-ups are applied. A clear fee structure makes it easier to understand what your property is really returning each month.
At Lyss Homes, our fully managed lettings service includes free Rent Protection and Eviction Cover, helping landlords feel more secure when unexpected tenancy problems arise.
Consider both options
If you’re unsure whether to sell or let, don’t rely on a single figure.
A property may achieve a strong rental income but still offer a better financial outcome if sold. Equally, selling in a slower market may not be the right answer if the property has good long-term potential and manageable costs.
The practical next step is a dual valuation: ask what the property could achieve on the sales market and what rent it could reasonably achieve as a let.
You can request an online sales and lettings valuation from Lyss Homes, or view our current London property listings to compare local competition.
What’s the outlook?
Advertised rents are likely to remain above last year’s levels through the autumn, supported by tight supply and higher borrowing costs.
That does not mean rents will rise at the same pace every month. Affordability remains a limit, and the gap between advertised and achieved rents shows that tenants are still negotiating where they can.
For landlords, the strongest approach is not simply to chase the highest headline rent. It is to price sensibly, choose the right tenant, control costs and keep up with the rules.
If you’re weighing up sell versus let, or you want a clearer view of what your property could achieve, our local team is here to help with honest advice and a hands-on service.
This article is for general information only and is not financial, mortgage, tax or legal advice. Policies and market conditions can change, so speak to an appropriately qualified adviser before making investment or tax decisions.