January 2026 HomeLet Index vs What We’re Actually Seeing on the Ground
By base property specialists
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The latest HomeLet Rental Index suggests a cooling but stable rental market.
UK rents are down slightly month-on-month. London has softened since its October peak. Affordability has marginally improved. Annual growth remains positive.
On paper, this looks like a market recalibrating.
But here in London - particularly in the “natural middle” of the PRS - we’re seeing something more nuanced.
And potentially more structural.
Let’s talk about it.
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The official picture: softening, not sliding
According to the January 2026 HomeLet Rental Index:
• UK average rent: £1,302 pcm (-1.1% monthly, +2.4% annually)
• London average rent: £2,078 pcm (-2.4% monthly, +2.6% annually)
• London rents now sit 6.3% below October’s peak
• Tenants in London are spending 38.2% of gross income on rent
That final figure is the one that matters.
Because affordability isn’t just stretched - it’s psychologically stretched.
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What we’re actually seeing in Tower Hamlets
We currently have two beautifully refurbished listings in Tower Hamlets:
• A 4-bedroom house
• A 2-bedroom flat
Both presented to an exceptional standard. Both priced in line with market evidence. Both in historically high-demand zones.
Under normal conditions, these would let in days or weeks.
They haven’t.
Interest levels are materially down.
Applicant quality is inconsistent.
Several prospective tenants do not meet acceptable risk thresholds in the context of the upcoming Renters’ Reform landscape.
And this is not isolated.
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Hackney: the “can’t miss” sub-penthouse that didn’t fly
We also launched a genuinely exceptional sub-penthouse in Hackney at the start of December - picture-perfect, premium finish, prime location.
In a borough that has been one of London’s strongest performers (+4.8% annually per the Index) .
It let - but not instantly.
Not at the velocity we would have anticipated 12 months ago.
Not in the frictionless way prime Hackney usually performs.
That tells us something.
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The real shift: caution in the £1,000–£1,500 per person bracket
The most interesting part of the market right now isn’t prime.
It’s the middle.
In the £1,000–£1,500 per person monthly bracket - the natural core of London’s professional rental market - we are seeing:
• Increased hesitation before offers
• Longer decision-making cycles
• Higher scrutiny of long-term affordability
• Greater financial vetting risk
This is not a demand collapse.
It’s behavioural caution.
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Is the Renters Reform Act part of it?
Possibly - but only marginally.
Some tenants may be in “wait and see” mode, particularly around:
• Fixed-term certainty
• Notice periods
• Guarantor enforcement
• Future mobility
• Marketed prices
But this is not the dominant factor.
The far bigger issue is financial safety.
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Financial freedom, not affordability alone
The Index shows London renters spending 38.2% of income on rent .
That’s an average.
In reality, many applicants sit at 40–45% once student loans, transport, and rising living costs are factored in.
Tenants aren’t just asking:
“Can I afford this rent?”
They’re asking:
“Will I feel financially safe for the next 12–24 months?”
That’s new.
And it’s leading to:
• Conservative decision-making
• Reduced appetite for stretch properties
• More shared accommodation consideration
• Slower absorption of refurbished mid-market stock
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Why this matters for London landlords
The narrative nationally is:
“Rents are cooling but stable.”
The London reality is:
“The market is selective and cautious.”
And that means:
1. Pricing must reflect psychology, not just comparables
Data-led pricing is essential - but so is reading sentiment. This is infinitely more challenging after 1st May, when offers above the marketed price cannot legally be accepted.
2. Tenant quality filtering is more complex
In a post-RRA world, risk tolerance must tighten, not loosen.
3. Refurbishment alone is not enough
Presentation still matters - but it no longer guarantees velocity.
4. Time on market is becoming a leading indicator
What lets in 4 days vs 4 weeks now tells us more than annual growth figures.
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The borough divide still exists - but it’s not the full story
Yes, Ealing is up 9.9% annually.
Yes, Lewisham & Southwark are up 9.1%.
Yes, Hackney & Newham remain strong over 12 months- but all of this is based on average marketed rents and not the nuance of what properties are coming to market. In challenging markets, it's common to see the areas with the lowest rents seeing the greatest growth as tenants move to more affordable areas, often driving those rents up ironically.
But annual growth doesn’t equal instant liquidity.
And liquidity is what landlords feel first.
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What this means for 2026
We believe London is entering a phase defined by:
• Cautious tenants
• Heightened financial sensitivity
• Stronger emphasis on security and flexibility
• Greater divergence between “best-in-class” management and average agencies
The market is not falling.
It is filtering.
And filtering markets reward professional operators.
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Why this strengthens base’s position
This is precisely the environment where:
• Rigorous referencing matters
• Transparent communication matters
• Honest pricing advice matters
• Proactive void management matters
In 2021–2023, momentum covered many sins in the industry.
In 2026, it won’t.
The agencies who understand behavioural economics, regulatory risk, and London micro-markets will outperform.
That’s our lane.
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Final thought: don’t confuse stability with simplicity
The January Index gives us useful macro context.
But London is rarely a macro market.
Right now, the capital feels more cautious than the data alone suggests.
Not collapsing.
Not booming.
But careful.
And careful markets demand careful management.
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A direct invitation to London landlords
If your property is taking longer to let than expected…
If applicant quality feels weaker…
If you're unsure how the RRA changes your risk exposure…
Let’s talk.
We’ll give you an honest view - backed by borough-level data, 21 years of operational experience, and what we’re seeing right now on the ground in London.
base property specialists
London lettings. Not just listed - understood.
