London’s rental market has staged a sharp turnaround, with tenant demand rising above last year’s levels despite a further reduction in available properties.
New figures from Rightmove show rental demand in the capital was 7% higher year-on-year in September, reversing the downward trend recorded during the first eight months of 2026.
Until the end of August, demand had been running an average of 7% below 2025 levels.
Rightmove’s Daily Demand Tracker shows that enquiries from prospective tenants moved above last year’s levels on 7 September and have remained higher since.
The recovery contrasts with the wider market. Rental demand across Great Britain is 2% lower than a year ago, with the North East the only other region recording growth, at 1%.
Rental stock falls as demand recovers
The increase in London comes as the number of available rental properties continues to decline.
Rightmove reports that rental stock in the capital is 10% lower than a year ago. Across Great Britain, supply has increased marginally, by 0.4%.
Average advertised rents in London have reached £2,763 per month, up 3.1% year-on-year.
That compares with a national average of £1,578, an annual increase of 2.4%.
Smaller properties lead the recovery
Smaller rental homes are driving much of London’s renewed demand.
Enquiries for studios and one-bedroom properties have increased by 10% compared with last year, against a 4% rise nationally.
The average advertised rent for a property with up to one bedroom in London now stands at £1,904 per month. The national equivalent is £1,150.
Demand for larger properties has also strengthened in the capital, although at a slower pace.
Enquiries for two-bedroom homes have increased by 6%, while demand for three-bedroom properties is up 2.5%.
The national picture is markedly different. Demand for two-bedroom properties has fallen by 4%, while three-bedroom homes have recorded a 6% decline.
First-time buyers staying in rented accommodation?
Rightmove suggested that some prospective first-time buyers may be delaying their purchases because of affordability pressures and higher mortgage rates.
Colleen Babcock, Rightmove’s property expert, said: “One possible factor behind London’s recent rise in rental demand is that some would-be first-time buyers may be taking longer before committing to a purchase. Affordability remains a challenge for many aspiring homeowners in the capital, particularly when it comes to saving for a deposit and bridging the gap between house prices and earnings.
“Mortgage rates remain relatively high and close to some of the highest levels seen in recent years, while the gap between house prices and earnings in London continues to make home ownership a challenge for many aspiring buyers.
“That could be encouraging some movers to stay in the rental sector for longer while they assess their options, save for a deposit or wait to see how support schemes such as the proposed Your First Home initiative develop. It’s too early to draw a direct link, but it may help explain why demand for smaller rental homes in London is currently rising faster than the national average.”
