Landlords have been exiting the London rental market since reforms were first proposed with implications for buy-to-let supply and investment dynamics.

Analysis from Investec Bank shows that in Q1 2025, 49.9% of homes listed for sale in London had been rental properties within the previous three years, up from 32.4% a year earlier.

Many of these properties are not returning to the rental sector, with only around one in ten homes purchased in Q2 and Q3 2025 subsequently re-let.

This points to a contraction in underlying rental stock, even as activity remains high, with more than 113,000 rental listings recorded in Q1 2026.

CHANGING BEHAVIOUR

The shift reflects changing landlord behaviour ahead of the Renters’ Rights Act 2025, alongside ongoing pressure from higher mortgage costs, taxation and compliance requirements.

The trend signals a rebalancing of the buy-to-let sector, with smaller landlords more likely to exit and larger, better-capitalised investors increasing their presence.

Investec said professional landlords and institutional investors are better placed to operate in a more regulated environment, supported by stronger processes and diversified portfolios.

Despite tightening supply, rents have remained broadly flat at around £2,200 per month, suggesting affordability constraints are limiting further growth.

INCOME RISK

Mandeep Dhillon (main picture, inset), Private Banker at Investec Bank, said: “Stock levels are falling as many properties sold are not returning to the rental market, which should support demand for landlords who remain invested.

“We are seeing well-capitalised landlords acquire additional units as some part-time landlords exit, with larger portfolios helping to manage income risk and regulatory demands.”