Editor's note: This brief was summarised by The Property AI Team from a report by PropertyWire. Read the original article for full details.
London Rental Demand Rises 7% as National Market Weakens
Tenant demand in London has increased 7% year-on-year, according to Rightmove data, reversing a market that had trailed 2025 levels by an average of 7% throughout the year to date. The upturn began on 7th September, when London's rental demand moved above equivalent 2025 levels, and has held that position since, based on Rightmove's Daily Demand Tracker, which measures enquiries sent to letting agents by prospective tenants.
The capital is now one of only two regions recording annual growth in rental enquiries, alongside the North East, which has seen a 1% increase. Nationally, tenant demand remains 2% below last year's levels across Britain overall.
Supply Constraints Persist
The rise in demand comes despite a 10% year-on-year reduction in available rental properties in London, against a 0.4% increase in rental stock nationally. This imbalance has pushed up rental costs, with average advertised rents in the capital reaching £2,763 per calendar month, up 3.1% annually. The national average stands at £1,578, a 2.4% annual increase.
Smaller Properties Driving Growth
Studio and one-bedroom rental properties in London have seen enquiries rise 10% year-on-year, compared with a 4% increase nationally. These smaller units command average monthly rents of £1,904 in London, well above the national average of £1,150.
Demand for larger properties is also growing in the capital, though more modestly. Two-bedroom properties have recorded a 6% increase in enquiries and three-bedroom homes are up 2.5%. Nationally, demand for these property types has declined by 4% and 6% respectively.
First-Time Buyer Challenges
Colleen Babcock, Rightmove's Property Expert, suggested that affordability challenges may be keeping potential first-time buyers in the rental market for longer. She noted that mortgage rates remain near recent highs, while the gap between house prices and earnings in London continues to present obstacles for aspiring homeowners.
Some prospective buyers may be staying as tenants while saving for deposits or awaiting developments in support schemes such as the proposed Your First Home initiative, as landlords respond to regulatory changes and supply constraints continue to shape the rental sector.
What This Means for Agents
London and the national market are moving in different directions. With rental stock declining and demand rising — particularly for smaller properties suited to single professionals or couples — the supply-demand imbalance looks likely to sustain upward pressure on rents in the near term.
For investors, the data points to continued strength in London's rental market, particularly in the studio and one-bedroom segment, though higher entry costs and potential tax reform will require careful consideration of yields and capital requirements.
Source: PropertyWire