London Rents Rise 6.1% as Rental Growth Slows but Supply Remains Tight

Although rents continued to rise, the pace of growth slowed significantly from the 9.8% annual increase recorded in August.

The figures provide another indication of how London's rental market is changing following the introduction of the Renters' Rights Act.

Rental growth remains positive

The September figures represent the fifth consecutive month of annual rental growth since the Renters' Rights Act came into force.

The annual growth readings reported since May have been:

• May: 3.7%

• June: 6.4%

• July: 8.7%

• August: 9.8%

• September: 6.1%

Despite the slowdown in September, advertised rents remained almost 13% above their January-to-April level, according to the reported analysis.

Why is rental growth slowing?

A slowdown from 9.8% to 6.1% is significant.

However, it should not be interpreted as a fall in rents.

Rents are still increasing year-on-year; they are simply increasing at a slower rate.

Rental markets can behave this way when the balance between supply and demand changes.

The September data suggests that rental supply remains tight, limiting the extent to which rents can fall despite slower growth.

London demand remains resilient

Separate analysis from Rightmove showed that rental demand in London strengthened during September.

Tenant enquiries in the capital were reported to be 7% higher than a year earlier, while demand across Great Britain was 2% lower.

That divergence is important.

It suggests that London's rental market may be experiencing a different demand pattern from the wider UK market.

What does this mean for tenants?

For tenants, a 6.1% annual increase is still substantial.

A household renewing a tenancy may face significantly higher costs than it did a year earlier, depending on the property and location.

Tenants should therefore consider the full cost of renting, including:

• Monthly rent

• Council tax

• Energy

• Transport

• Insurance

• Service charges where applicable

• Moving costs

Affordability remains a major consideration even when rental growth begins to slow.

What does it mean for landlords?

The latest figures provide some support for landlords facing higher operating and financing costs.

Strong rental demand can help landlords maintain occupancy and rental income.

However, landlords should not assume that 6.1% annual growth will continue indefinitely.

A slowing growth rate suggests that the market may be moving towards a more moderate rental environment.

Landlords should therefore base investment decisions on sustainable rents rather than extrapolating the strongest recent increases indefinitely.

London's rental market remains highly localised

Greater London is not a single rental market.

Rents vary significantly between boroughs, property types and neighbourhoods.

A landlord considering a property should therefore analyse:

• Local advertised rents

• Tenant demand

• Competing properties

• Transport links

• Property condition

• Local employment

• Void periods

• Licensing requirements

• Mortgage costs

A city-wide average provides context but cannot replace property-level analysis.

Supply remains critical

One of the biggest questions for London's rental market is whether more homes will become available.

If rental supply increases substantially, competition between landlords could increase and rental growth could slow further.

If supply remains constrained while demand stays strong, rents could continue to rise.

The September figures therefore need to be viewed as part of a broader supply-and-demand story.

What should renters do?

Renters should monitor the market rather than assuming every landlord will increase rent by the headline 6.1%.

Different properties can experience very different rental movements.

Where a tenancy is approaching renewal, tenants can research comparable properties in the same area to understand the local market.

What should investors watch?

Property investors should monitor both rent growth and purchase prices.

A strong rental market can support yields, but rising property values can reduce yields if purchase prices increase faster than rents.

At the same time, mortgage costs remain important.

The average five-year fixed mortgage rate reached 6% in early October, increasing the cost of leveraged property investment.

A market that is cooling, not collapsing

The September data points towards moderation rather than a collapse in London's rental market.

Annual growth remains positive, demand has remained resilient and supply constraints continue to influence pricing.

For tenants, affordability remains a challenge.

For landlords, the figures provide evidence of continued rental demand but also a reminder that double-digit rental growth cannot be assumed to continue.

The next few months will show whether London's rental market settles into a slower but more sustainable rate of growth.

Source: Hello Neighbour data reported by Property Reporter, with Rightmove rental-demand context.

Disclaimer: Advertised rents are not the same as achieved rents and can vary significantly between individual properties.