Demand for rental properties in London strengthened in October, according to the latest research from Chestertons, as a shortage of available homes continued to push rents higher.
Chestertons recorded a 4.1% year-on-year increase in new tenant registrations, ahead of the 3.6% average increase for the year to date. Meanwhile, property portal enquiries remained broadly stable, rising by just 0.2%.
The figures suggest that a greater proportion of prospective tenants are progressing from initial enquiries to actively registering with an agent.
The findings come as London's buy-to-let market continues to evolve, with rising rents and improving rental yields presenting opportunities for investors, despite recent changes to landlord taxation announced in the Government's October Budget.
The ratio of portal enquiries converting into tenant registrations reached 0.63 in October, its highest level for seven months and above the 0.61 recorded a year earlier.
Meanwhile, Chestertons recorded a 13.1% year-on-year reduction in the number of landlords lowering their initial asking rents, compared with a 9.1% reduction for the year to date.
This is particularly interesting as we continue to anticipate the impact of new landlord legislation.
Katinka Hill, Head of Lettings at Chestertons, said: "For buy-to-let landlords, this is encouraging news. Rising rents and improving yields are creating opportunities for investors, although choosing the right property and setting a realistic asking rent remain essential to securing reliable tenants and minimising void periods."
According to Rightmove's Rental Trends Tracker, average monthly asking rents in London increased by 3.3% year-on-year to £2,825 during the third quarter of 2026, accelerating from 2.9% in the previous quarter.
This compares with annual rental growth of 2.4% across the rest of Britain.
Meanwhile, Zoopla reports that the number of homes available to rent across Inner London has fallen by 13% over the past year, while tenant demand has increased.
The reduction in supply reflects several years of rising taxation, regulation and borrowing costs, which have prompted some landlords to sell or reconsider their investments.
The Government's October Budget introduced a further two percentage point increase in income tax on rental profits, adding to the two-percentage point rise announced in November 2025.
Both increases will take effect from 6 April 2027, bringing the basic rate of income tax on rental profits to 24%, compared with the original 20%, while the highest rate will rise from 45% to 49%.
The changes apply to individual landlords rather than rental profits generated through limited companies, which remain subject to corporation tax.
The Bank of England's recent decision to increase its base rate from 3.75% to 4% may add to costs for landlords with variable-rate mortgages, potentially encouraging more to leave the sector.
Despite these challenges, there are tentative signs that buy-to-let investment may be recovering.
Figures published by UK Finance show that 16,026 properties were purchased using buy-to-let mortgages across the UK during the second quarter of 2026, representing a 23% increase compared with the same period in 2025.
Although these figures are national, London's rising rents and improving yields could attract investors seeking longer-term returns. Rightmove reports that rental yields in London increased from 5.7% to 6.1% over the past year, the largest increase of any UK region.
The different tax treatment of limited companies could also encourage more investors to adopt corporate ownership structures.
Katinka Hill added: "Despite the additional tax pressures facing individual landlords, we're seeing opportunities for investors purchasing through limited companies, particularly those looking to build or expand their rental portfolios.
"Renewed buy-to-let investment would be welcome news for London's rental market, helping to maintain the supply of homes available to tenants while offering investors the potential for longer-term returns."
Chestertons' latest figures suggest that tenant demand remains resilient, with a growing proportion of prospective renters actively progressing their property searches.
Combined with the shortage of available homes, this is likely to maintain pressure on rental values, although conditions will vary between neighbourhoods and property types.
Chestertons' lettings teams combine detailed local knowledge with a connected London-wide network, helping landlords understand rental values, tenant demand and changing market conditions.