I recently read Zoopla’s UK Rental Market Report for the third quarter of 2026.
If I had to sum it up in one sentence, it would be this:
After three years of improving supply, the UK rental market is shifting back towards a shortage of available homes — and London is experiencing some of the strongest pressure in this new phase. Many people see that the property sales market is relatively subdued at the moment and naturally assume that the rental market should also be fairly quiet. In reality, however, the two markets are moving in different directions.
Fewer People Are Buying, While More Are Renting
In July 2026, rents on newly listed rental properties across the UK rose by 2.6% year on year, up from a low of 1.6% in February this year. The average UK rent has now reached £1,343 per month, while the average rent in London stands at £2,260 per month.
What deserves even more attention than the rent itself is the supply-and-demand picture behind it:
- The number of homes available to rent across the UK is 3% lower than a year ago;
- The number of new rental properties coming onto the market is down 6% year on year;
- Each rental property receives an average of 5.3 tenant enquiries, the highest level in nearly two years;
- By the end of 2026, UK rental growth is expected to rise further to 4%–5%.
In other words, the direction of the rental market is becoming very clear:
Rental supply is beginning to fall, while tenant demand is rising again.
One particularly important factor behind this increase in demand is mortgage rates. When mortgage rates rise, it is not only existing homeowners who are affected. Many younger people who had been preparing to buy their first home had to postpone their purchase because of higher borrowing costs and larger deposit requirements, leaving them in the rental market for longer. Higher interest rates therefore work in two directions: they increase holding costs for some landlords and reduce new rental supply, while also keeping more would-be buyers in rented accommodation. With supply falling and demand increasing, rents are naturally coming under renewed upward pressure.
London Currently Shows the Clearest Supply-and-Demand Imbalance
Average rents in London have risen by 2.9% over the past year, compared with growth of 1.7% a year earlier.
However, the figure that really stands out in London is the number of homes available to rent. Rental supply across London is down 6% year on year; in central London, the number of available rental properties has fallen by as much as 13%. At the same time, rental demand in London is increasing.
The reason is very practical. Following the rise in mortgage rates this year, a London buyer who wants to keep their monthly mortgage payment at the same level as at the beginning of the year would, on average, need to contribute an additional £35,500 towards their deposit. Across the UK as a whole, the average additional deposit required is £18,200. This means the pressure on prospective buyers in London is almost twice the UK average. Some people who had planned to buy therefore have little choice but to continue renting, while rental supply in central London is simultaneously shrinking. As a result, rental growth in central London has now reached 3%–4%. This also explains something we have been noticing very clearly in our day-to-day lettings activity: Well-located, well-presented homes that are priced appropriately continue to attract a very fast market response.
In London today, it is not the case that every property is easy to let; rather, high-quality rental homes are becoming increasingly scarce. Tenants compare properties carefully, and they have choices. But when a property’s location, condition, furnishings and management meet market expectations, there is still a consistent level of competition among prospective tenants.
New Regulation Is Not the Only Reason the Market Is Changing
One of the issues UK landlords are most concerned about at present is the impact of the Renters’ Rights Act.
New regulatory requirements, higher compliance costs and rising property holding costs can certainly influence whether some landlords decide to remain in the rental market.
However, the report also makes an interesting observation: Scotland has operated rental rules similar to England’s new framework for several years, yet it is also experiencing a reduction in rental supply and faster rent growth. It would therefore be too simplistic to attribute every current market change solely to the new legislation. The deeper issue remains supply and demand: Investment in new rental stock is insufficient, some landlords are leaving the market, and people who had intended to buy are remaining in rented accommodation because of interest rates. Regulation is one factor, but it is not the whole story.
For Landlords, the Priority Is Not Simply to Raise the Rent
When landlords see rents rising, their first reaction may be: should I increase the rent immediately?
But in my view, professional lettings management is about far more than simply setting a higher asking rent.
What landlords really need to consider is:
- First, where should the rent be positioned so that the property can achieve a stronger return without creating unnecessary void periods through overpricing?
- Second, how can a landlord select, from multiple applicants, high-quality tenants with stable finances who are likely to stay for the longer term?
- Third, are the property’s compliance, maintenance and day-to-day management standards robust enough to meet the stricter requirements of the new regulatory environment?
- Fourth, at renewal or when remarketing the property, how should the rent be adjusted using real-time market data rather than instinct alone?
An extra £100 per month in rent is, of course, important.
But if incorrect pricing leaves a property vacant for a month, or if poor tenant selection, compliance or maintenance management leads to a dispute, the resulting loss can be far greater than that additional rent.
The stronger the market, therefore, the more important professional judgement becomes.
London’s Rental Market Is Likely to Remain Landlord-Leaning Over the Coming Months
Based on the current data, my view of London’s rental market over the next few months is that tenant demand is likely to remain relatively stable, good-quality rental stock will continue to be in short supply, and rental growth may accelerate further. But that does not mean every landlord will automatically achieve a better return. Whether market opportunities translate into actual returns for landlords depends on how well the property is prepared, priced and marketed, how tenants are screened, and how the tenancy is managed afterwards.
When managing rental properties in London, there is one point we are placing increasing emphasis on:
Property management does not begin and end with simply “getting the property let”. True asset management starts before the property even comes to market. In a market where regulation is continually evolving and tenant expectations are rising, a property’s ability to remain consistently let over the long term, minimise void periods and control risk depends on a complete and professional management system.
The UK property sales market remains relatively subdued, but London’s rental market is already beginning to warm up again. For landlords planning to continue holding London property, this may be a particularly important time to manage their assets carefully and review both their rental pricing and letting strategy.
Because in the next phase of the market, what will be genuinely scarce is not only rental property in London.
It will also be rental property that is managed professionally and effectively for the long term.
Data source: Zoopla, UK Rental Market Report, September 2026.