The introduction of the Renters' Rights Act marked one of the biggest changes to the private rented sector in recent years. In the months leading up to its implementation, there was no shortage of speculation about how landlords would respond.
Some considered selling, others paused expansion plans and many adopted a wait-and-see approach as they assessed the impact of the new legislation.
Five months after the Act came into force, however, there are signs that confidence is returning to the London lettings market.
Chestertons' latest analysis shows that one in four landlords who had previously put their property up for sale have since returned to the lettings market, suggesting that many owners continue to see long-term value in residential investment despite regulatory change.
At the same time, tenant demand is increasing, rental supply remains constrained and rents are once again rising across the capital. Taken together, these trends indicate that London's rental market has adapted more quickly than some expected.
Demand from prospective tenants has strengthened in recent months, reflecting both London's enduring appeal and the ongoing challenges many people face in accessing home ownership.
According to Chestertons' latest lettings data, applicant registrations increased by 6.4% year-on-year in September, following a 7.4% increase in August. Portal enquiries were also up 4.7% and viewings rose by 14%, highlighting sustained interest from renters across the capital.
While affordability remains a consideration for many households, renting continues to offer the flexibility that tenants often need when changing jobs, relocating within London or adapting to changing family circumstances.
This trend is not unique to Chestertons' own data. Rightmove recently reported that tenant enquiries in London increased by 7% year-on-year in September, making the capital one of just two regions in Great Britain to record rising demand during the month, while demand nationally declined.
The latest findings from the Royal Institution of Chartered Surveyors (RICS) also point in the same direction, with survey respondents reporting stronger tenant demand during the third quarter of the year.
Increasing demand alone is not enough to shape market conditions. What makes the current environment particularly notable is that tenant demand is rising at a time when the availability of rental properties remains limited.
According to Rightmove, the number of available rental properties in London has fallen by 10% over the past 12 months. By contrast, available supply across Great Britain as a whole has edged slightly higher over the same period.
This supply imbalance is important because it underpins many of the trends landlords are currently witnessing on the ground. When there are fewer homes available and more tenants searching, landlords often benefit from greater levels of interest in their properties, particularly when homes are well presented and priced appropriately.
The shortage of supply is also helping to support rental growth.
After a period in which rent inflation moderated significantly from the highs seen in 2022, London's rental market has entered a new phase. Rightmove's latest figures show average advertised rents increasing by 2.9% year-on-year to £2,791 per month. This means rental growth in London is now outpacing the national average.
For landlords who remained invested in the sector throughout this period, the return of rental growth will be a welcome development.
The finding that one in four landlords have returned to letting after previously putting their property up for sale raises an interesting question: what is driving the shift?
While every landlord's circumstances are different, several factors are likely to be influencing decision-making.
First, the anticipated exodus from the sector following the Renters' Rights Act has not materialised to the extent some predicted. Although the legislation has introduced changes that landlords must understand and adapt to, the fundamentals of the London rental market remain compelling.
Second, stronger rental growth is improving the income profile of many investment properties. As rents increase and demand remains robust, some landlords may see greater value in retaining their assets rather than selling.
Third, London's structural supply shortage continues to support the sector. Demand for homes in the capital remains resilient, supported by population growth, international mobility, changing working patterns and the significant affordability gap between buying and renting.
Although market conditions remain favourable, landlords should not assume that every property will automatically attract strong interest.
Quality, presentation and pricing continue to play a critical role in securing tenants.
As Katinka Hill, Head of Lettings at Chestertons, explains:
"We are still assessing how the Act is influencing tenant behaviour. However, well-presented properties offered at a competitive rent will continue to attract good tenants. Keeping homes in good repair and looking after tenants will also encourage them to stay longer.
Over the coming months, I will be watching closely how rents evolve and whether tenants are taking longer to make decisions or choosing to stay in their homes for extended periods."
The comment reflects an increasingly important theme within the lettings market. While demand remains healthy, today's tenants are often more selective than they were during the intense competition seen immediately after the pandemic.
Properties that are maintained to a high standard, professionally marketed and sensibly priced are most likely to achieve the strongest results.
The coming months will provide a clearer indication of how the market settles following the introduction of the Renters' Rights Act. However, the evidence available so far points to a sector that has adapted rather than contracted.
Tenant demand is rising. Rental supply remains constrained. Rents are growing again. And perhaps most significantly, a proportion of landlords who had considered leaving the sector have chosen to return.
For landlords across London, those are encouraging signs. While regulatory change has undoubtedly altered some aspects of the market, the fundamentals that have long underpinned the capital's rental sector remain firmly in place.