More than a third of landlords lifted asking rents in the first month of the Renters' Rights Act, according to Chestertons' latest market data.
The introduction of the Renters' Rights Act (RRA) on 1 May led to the unintended consequence of landlords lifting their asking rents to circumvent one of its key requirements.
The Act bans landlords from accepting offers above their initial asking rents, but Chestertons' data indicates it had the opposite effect, with a 36% year-on-year increase in landlords lifting their initial prices to test the market.
Meanwhile, Chestertons has stressed that in the sales market, proactive vendors are still achieving successful sales. This can be gauged by its monthly data, which showed a 20% year-on-year decrease in portal enquiries from potential buyers, but an 11% increase in both new sales offers and exchanges.
Enquiries on Chestertons' portal increased by 17% and 10% year-on-year in May and June following a decline of 13% in April, as many potential home buyers opted to rent during a period of political and economic uncertainty.
In May, the first month under the RRA, there was a sharp 36% year-on-year fall in the number of landlords cutting their rents. Following several months when there were increases in the data proportion matching reductions, this indicates that many landlords increased their asking rents to offer themselves greater flexibility, since the RRA bans them from accepting bids above the original asking rent.
There was a partial reversal of this trend in June, with a 6% year-on-year increase in the number of reductions, as some properties remained vacant following the larger, possibly one-off increase.
The data also suggests prospective tenants are shopping around more in reaction to the RRA. In May, portal enquiries outnumbered tenant applications by 1.99x, compared with an average of 1.61x in the previous six months.
According to Zoopla, asking rents in London rose by 2.2% year-on-year to £2,206 per calendar month in Q2, up from +1.7% in Q1. The Q2 increase for London compares with +2.0% for the rest of the UK, the first time in over two years that the capital has outpaced the remainder of the country, as dwindling supply has more than offset affordability constraints.
Katinka Hill, Head of Lettings at Chestertons, said: “Landlords have reacted to the Act by increasing the initial marketing price of their properties, to give themselves some leeway as they now cannot accept over the asking rent.
“However tenant demand across London continues to be resilient, with high levels of enquiries demonstrating that people are still actively looking to move.
“We’re also seeing tenants take more time to compare properties and make informed decisions, resulting in a more considered search process. For landlords, the focus is increasingly on getting the asking price right from the outset to attract the strongest level of interest.
“Well-priced, well-presented properties continue to let quickly and we’re encouraging clients to remain responsive to market feedback where necessary.
“Overall, we’re seeing a market that is settling into the new legislation, with demand continuing to outweigh supply across many parts of London, especially as we are mid-summer. As confidence in the new framework grows, we expect both landlords and tenants to become even more comfortable navigating the changing landscape.
“Prospective tenants are shopping around more, sending enquiries for more properties they are seeing online – shown in the recent disparity between portal enquiries and applicant registrations – as they are looking for value in the market to trigger a move.”
The RRA had, in theory, benefitted tenants, but many landlords sold their properties ahead of its introduction, and due to rising taxes and regulation, shrinking supply. However, recently, we are seeing landlords come back to lettings while the sales market is slow. As always, tenants should liaise closely with experienced agents to help them navigate a period of transition.
The sharp rise in asking rents in May resulted in some vacancies in June. Many landlords are now testing the market; they are best served by knowledgeable agents, who can support them with real-time market feedback and advice as tenants shop around more.
The economy has remained resilient despite global disruptions and political uncertainty at home. The Bank of England has held rates at 3.75% for four months.
In the sales market there are few buyers seeking properties, but Chestertons' monthly data show offers and exchanges holding up, albeit with sales taking longer to complete. Chestertons believes vendors who adopt proactive strategies are most likely to achieve sales. Improving affordability and pent-up demand support a strong rebound in activity when more stable conditions emerge.
GDP grew by 0.7% over the three months to April, up from +0.5% and +0.6% in the three months to February and March 2026. This follows a standstill in the run-up to the November Budget.
The cost of government borrowing, which influences mortgage rates, increased following the inflationary impact of the closing of the Strait of Hormuz. Ten-year Gilt yields rose from 4.23% immediately before the conflict to 5.23%, but have since fallen back to 4.79% amid the fragile ceasefire.
Consumer Price Inflation (CPI) has fallen from 3.3% to 2.8% over the same period and the Bank of England has held the Base Rate at 3.75% for four months.
However, the identity and economic policy of the future Prime Minister has added another layer of uncertainty.
RICS reports a continuing fall in UK buyer enquiries, although the rate of decline has slowed.
Mortgage approvals increased by 14.9% month-on-month in May on a seasonally adjusted basis, while completed transactions fell by 2.2%.
Latest figures from ONS, Halifax and Nationwide show UK house prices rising by 3.8%, 0.5% and 1.7% year-on-year respectively. In London, Nationwide reports annual price growth of 1.6%.
UK affordability has improved to a 12-year low of 5.6x earnings, from a peak of 6.9x in 2022. In London, affordability has improved from 11.6x earnings to 8.7x.
Chestertons' monthly data shows portal sales enquiries fell by 20% year-on-year as buyers continued a 'wait and see' stance amid the fragile ceasefire.
However, offers and exchanges both increased by 11% year-on-year, mostly reflecting committed buyers who entered the process amid healthier post-Budget demand in January and February.
On the supply side, instructions have fallen by 24% year-on-year.
The sales process has also become slower, from portal enquiries to offer and then to exchange.
A ceasefire becoming a permanent resolution in the Middle East could trigger market recovery. The big question is if and when there will be a decisive agreement in the Middle East. Although the ceasefire has been patchy, inflation and Gilt yields have settled.
With affordability improving more in London than any other region, albeit from the highest multiples of earnings, there remains the potential for a relatively quick rebound in demand once buyers can be assured that the outlook is clearer.
Adam Jennings, Head of Residential at Chestertons, said: "We are undoubtedly operating in a challenging sales market, and as a business we are focused on client communication, education and consistently high levels of activity.
“There are plenty of motivated buyers out there, but the reality is that the market is being driven by price. Launch too high and you miss your crucial entry into the market; launch with an evidence-based pricing strategy and you will attract far more interest. That's why direct and honest advice from the agent you partner with is absolutely essential. Sellers don't need to be told what they want to hear, they need to be told what will actually get them moved."
In this market, it is vital to be realistic on your asking price and your strategy should it not attract buyer interest. Often it is more effective to make one noticeable reduction rather than a succession of small cuts, which buyers can notice and then hold out for more. Alternative strategies include auction or short-term rental.
It is important to recognise these slow market conditions are unlikely to last forever and, if there is a convincing ceasefire and a return to political stability in the UK, there could be a rapid release of pent-up demand. If potential buyers have been holding off for unrealistic price reductions they could lose out.