How the London Rental Market is Changing

For much of this year, there have been signs that some of the intense pressure we have seen in London’s rental market might finally be beginning to ease.

September, however, has provided an interesting change of direction.

New figures from Rightmove show that tenant demand in London was 7% higher than a year earlier during September. That is particularly noteworthy because, across the first eight months of 2026, demand had been running at an average of 7% below 2025 levels. So, a total reversal.

According to Rightmove’s Daily Demand Tracker, enquiries moved above last year’s levels on 7 September and have remained there since.

So, has the London rental market suddenly begun to tighten again?

There are certainly some signs that it has.

Demand is rising as supply falls

Perhaps the most significant part of the latest Rightmove figures is not demand alone, but what is happening to supply at the same time.

The number of available rental homes in London is reportedly 10% lower than it was a year ago. Demand 7% up, supply 10% down.

That contrasts with the wider British rental market, where available stock has in fact increased marginally, and overall tenant demand is 2% lower than last year.

London, in other words, is currently behaving differently.

That is broadly in line with other recent market data. In a similar way, Zoopla has reported a reduction in the number of homes available to rent, as well as a fall in the flow of new properties entering the rental market.

None of this automatically means a return to the extraordinarily competitive rental conditions we saw a few years ago. But it does suggest the balance between supply and demand may once again be recalibrating.

Here in South London, our own local figures provide some useful context.

Across the South London neighbourhoods and boroughs that we cover, rents now average £2,110 per calendar month (pcm), a 9% growth over the last 12 months, and that being almost three times higher than the 3.3% rise in rental values across London as a whole during the same period.

These figures matter because rental growth is ultimately a reflection of what tenants can afford as well as how much competition exists for available homes.

There is always a ceiling.

What is happening on the ground?

Another useful indicator is how quickly properties are finding tenants.

Our latest South London data shows that the average rental property currently takes just 11 days of marketing to secure the tenant.

That tells us considerably more than asking prices alone.

A healthy rental market is not necessarily one where rents are rising rapidly. For landlords, arguably the better scenario is one in which good properties attract suitable tenants quickly, void periods remain low and rents remain affordable enough for tenants to sustain them.

We can also look at actual market activity.

Over the latest 12-month period there have been around 11,200 private rentals agreed across South West London. That is not far off 1,000 per month.

This helps distinguish between headline demand and actual movement within the market.

After all, many people clicking on property adverts or sending enquiries is one thing. Tenancies being agreed and people actually moving home is another.

Smaller properties are seeing the biggest increase in demand

There is something else interesting emerging in the latest Rightmove figures.

Demand for studios and one-bedroom homes in London is now 10% higher than it was last year. Demand for two-bedroom properties is up 6%, while enquiries for three-bedroom homes have increased by 2.5%.

That is very different from the national picture, where demand for both two and three-bedroom homes has fallen.

It raises an obvious question: who is driving the renewed demand?

The profile of the typical South London renter gives us some clues. Data through Information Works puts the average tenant age at 29, with employment levels high among local renters. South London also has a substantial professional workforce, with public administration, education and health alone accounting for 26.5% of the local working-age population.

South London has always attracted a large and diverse population of professional renters, from people at the beginning of their careers to couples, young families and people who simply prefer the flexibility of renting.

But that tenant profile suggests that there may now be another group remaining in the sector for longer than they may have originally expected.

Are would-be first-time buyers renting for longer?

Rightmove has suggested that some prospective first-time buyers may be delaying purchasing a home because of affordability pressures.

It is important to stress that this is a possible explanation rather than a proven cause.

But it certainly makes sense.

The sales and lettings markets do not operate independently of one another.

Someone who decides not to buy a property this year does not disappear from the housing market. In many cases, they remain in rented accommodation.

And London presents particular affordability challenges.

Higher property prices mean that buyers need larger deposits and, even once a deposit has been saved, mortgage costs can be considerably higher than they were just a few years ago.

That could help explain why demand for studios and one-bedroom rental properties – the type of homes often occupied by younger renters and prospective first-time buyers – has increased particularly quickly.

The government has just announced a proposed new scheme – the Your First Home scheme, helping first-time buyers onto the ladder through an equity loan which reduces the amount of deposit they will need to save for.

All well and good… but this scheme is also designed purely for new build purchases; and in a place like London, where building land is a premium, significant new build development is difficult to come by.

Strong demand does not mean landlords can name their price

There is an important warning here for landlords.

Whenever reports emerge about increasing tenant demand and falling rental supply, it can be tempting to assume that almost any property will let, at almost any rent.

That is not what we see in practice.

Tenants remain price-conscious.

They compare properties. They look carefully at condition and presentation. They expect repairs to be dealt with properly and they increasingly understand their rights. And in understanding their rights, many know that the First-tier Tribunal system exists in part to prevent ‘unfair’ rents.

A well-maintained home, priced sensibly for its location and condition, is still likely to attract considerably stronger interest than a property which has been pushed onto the market at an unrealistic rent simply because demand is supposedly high.

Sometimes achieving an extra £50 per month sounds attractive until a property spends an additional three or four weeks empty while the landlord waits for someone prepared to pay it.

The mathematics of a void period can very quickly wipe out the benefit of a higher asking rent.

The market is becoming more complex at the same time

There is another reason landlords should resist complacency.

While tenant demand may be increasing, managing a rental property is certainly not becoming simpler.

The implementation of the Renters’ Rights Act has fundamentally altered the regulatory environment for landlords and letting agents, while compliance requirements continue to evolve across everything from property standards to tenancy management and Right to Rent checks.

That means a strong rental market should not be confused with an easy rental market.

Finding a tenant is only one part of being a landlord.

Finding the right tenant, completing the necessary checks, setting up the tenancy correctly, remaining compliant, managing maintenance and maintaining a positive landlord-tenant relationship throughout the tenancy are every bit as important.

So where does the South London rental market go next?

One month does not make a trend.

It would be premature to assume that September’s jump in London rental demand means we are returning to the extreme imbalance seen in previous years.

But the direction of travel is worth watching.

Demand has strengthened. Rental supply has tightened. Smaller properties are attracting significantly more interest and some prospective buyers may be remaining within the rental sector for longer.

For landlords, those conditions present an opportunity – but also a responsibility.

A strong rental market works best when good landlords provide good homes at sustainable rents, good tenants can make confident decisions and properties are professionally managed for the long term.

That remains the balance we want to see across South London.

If you own a rental property in South London and would like to understand its current rental value, or wish to discuss whether full property management could make your life easier, speak to our team here at Your Home Managed.