Landlords have been exiting the London market since proposals for rental reform first emerged, with fewer homes returning to the lettings sector, according to new analysis from Investec Bank plc.
The lender said the proportion of homes previously used as rental properties being listed for sale rose sharply following the initial proposal of the Renters’ Rights Bill in September 2024, ahead of its introduction on 1 May 2026.
In Q1 2025, almost half of all London homes listed for sale had been rental properties at some point in the previous three years, rising to 49.9% from 32.4% in Q1 2024.
However, in Q2 and Q3 2025, only one in 10 properties purchased were subsequently re-let, pointing to a potential contraction in underlying rental supply.
Despite this, listing activity has remained elevated. In Q1 2026, there were 113,707 rental listings across London, up 15.5% on Q1 2024 and 18.0% higher than Q1 2025. This suggests a higher level of churn within the market, even as the overall pool of available rental homes shrinks.
Rents have remained broadly flat over the same period. Median rents stood at £2,200 in both Q1 2024 and Q1 2025, before edging slightly lower to £2,197 in Q1 2026, indicating affordability constraints may be limiting upward pressure despite restricted supply.
SHIFT TOWARDS PROFESSIONAL LANDLORDS
Investec said the evolving regulatory landscape could accelerate a shift towards larger, better-capitalised landlords.
Mandeep Dhillon, private banker at Investec, said: “London rental market data shows that stock levels are falling as many properties sold are not returning to the rental market.
“That should help support demand for landlords who remain invested in the sector. While the end of fixed-term contracts could make rental income feel less predictable at first glance, it may also increase the length of some tenancies as more occupants seek stability.
“We are seeing well-capitalised landlords and property entrepreneurs acquire additional units as some part-time landlords exit the market.
“Typically, these clients have the administrative support and established processes to manage increased regulation, while diversified portfolios help spread income risk across multiple units.”
CO-LIVING INTEREST GROWS
Separate findings from Investec’s Future Living report point to growing investor interest in co-living schemes, which typically require greater scale and operational capability.
Four in 10 investors said co-living offered strong risk-adjusted returns over the next five years, while 36% said the introduction of the Renters’ Rights Act would encourage them to increase investment in the sector.
The lender also highlighted signs of pressure in parts of the prime London sales market. Its Property Index 2026 found nearly 7,000 homes priced at £1m or more were listed in 2025, up 12% on 2024, alongside deeper asking price reductions in areas such as St John’s Wood, Knightsbridge and Bayswater.
Investec said the combination of tighter rental supply, increased regulation and shifting investor behaviour is reshaping the structure of London’s private rented sector.
