What the latest HomeLet Rental Index tells us - and what it doesn't - about London's rental market
By base property specialists
Every month, when the latest HomeLet Rental Index lands in our inbox, we do exactly the same thing.
Yes, we look at the headline numbers. We want to know where rents have moved, which regions have outperformed and whether London has strengthened or softened. But almost immediately we find ourselves asking a different question.
Does this reflect what we're actually seeing?
That's one of the advantages of operating exclusively in London's lettings market. By the time the data is published, we've already spent the previous month speaking to landlords, conducting valuations, negotiating tenancies and helping applicants secure their next home. The statistics are incredibly valuable, but they are always looking in the rear-view mirror. Day-to-day conversations with landlords and tenants tell us where the market is heading next.
This month, perhaps more than any other this year, the data and our own experience are beginning to align.
HomeLet reports that London is now the UK's strongest performing rental market, with average rents reaching £2,181 per calendar month and annual growth climbing to 5%. On paper, that paints the picture of a market gathering momentum again after a relatively subdued start to the year.
The reality is a little more nuanced.
We're certainly seeing more activity than we were a few months ago. More landlords are bringing properties to market, enquiry levels are increasing and viewing numbers have risen across much of our portfolio. That's exactly what we'd expect as we move towards the traditional summer lettings season. August and September have always been the busiest months of the year for us, and July has typically been the point where that momentum starts to build rather than the month where it peaks.
However, we're not convinced London's reported rental growth tells the whole story.
One of the challenges with any rental index is that it measures outcomes rather than motivations. Over the past twelve months we've repeatedly discussed the impact we expected the Renters' Rights Act to have on the market, particularly around long-standing tenancies where rents had drifted well below prevailing market levels. Many landlords made the decision to reset those rents before the legislation came into force, either by agreeing revised terms with existing tenants or by reletting properties at current market values.
Those increases quite rightly appear in the data as rental growth.
But they don't necessarily reflect a market where tenants are suddenly willing or able to pay substantially more for comparable homes.
In our view, much of what we're seeing is still a market repricing itself rather than entering another period of rapid rental inflation. That's an important distinction because it changes how landlords should approach the months ahead. Chasing headline growth is one thing. Understanding where genuine market demand sits is something else entirely.
Perhaps the biggest behavioural shift we've noticed isn't actually about rents at all. It's about timing.
Historically, most tenants would begin their property search four or five weeks before the end of their tenancy. That dictated almost everything in our industry. Marketing campaigns, viewing schedules and landlord expectations all revolved around that relatively predictable cycle.
Today, we're seeing something very different.
Applicants are increasingly registering their interest two and a half to three months before they intend to move. At first glance, that might suggest demand has suddenly increased, but the explanation is much simpler. Periodic tenancies have changed how people plan. Rather than waiting until the final few weeks before serving notice, tenants are searching much earlier, finding the right property and then timing their notice accordingly to minimise any overlap between tenancies.
In other words, it's largely the same market.
It's just happening six weeks earlier than it used to.
That subtle change has important implications for landlords and agents alike because it also affects how properties should be launched.
If there's one area where experience has become more valuable than ever, it's pricing.
The ban on accepting offers above the advertised rent has fundamentally changed the role of the asking price. Previously, there was often room to test the market slightly below perceived value, knowing that strong competition could drive the final agreed rent higher. That safety net has gone. Today, the advertised rent is effectively the ceiling.
As a result, pricing has become a much finer balancing act.
We're seeing some properties comfortably achieve ambitious asking prices, while others require early reductions because they've been launched beyond where today's tenants are prepared to engage. In many cases, those adjustments aren't a reflection of weak demand. They're a reflection of optimistic pricing.
Overpricing remains one of the most damaging mistakes an agent can make because it costs something that is difficult to recover - momentum.
The best agents don't simply ask what rent they can achieve. They ask what outcome the landlord actually wants.
Some landlords are happy to hold out for every last pound of rental income because their financial position allows them to absorb a longer void. Others value certainty above everything else. For them, securing an excellent tenant quickly and eliminating the risk of several weeks without income is the better commercial decision.
That's where local knowledge becomes invaluable.
No amount of national data can tell you how tenants are responding to a beautifully refurbished apartment overlooking Regent's Canal compared with a similar property five streets away in Bethnal Green. That's where experience, judgement and daily market exposure still matter.
If tenant behaviour is evolving, landlord behaviour is changing even faster.
More than half of the new landlord enquiries coming into base are now driven primarily by compliance rather than marketing or service. That's a remarkable shift compared with even two or three years ago.
The conversations we're having today are no longer centred around achieving an extra £50 per month in rent. Instead, landlords want to know whether they're meeting their legal obligations, whether they're exposed to financial penalties and whether they can continue managing their own properties safely.
The surprising thing is that most of the landlords we meet aren't bad landlords.
Far from it.
Many have excellent relationships with their tenants and genuinely care about the homes they provide. Their challenge is simply that the regulatory landscape has become so complex that keeping pace requires ongoing education and constant attention. You don't know what you don't know, and that's becoming one of the defining risks for self-managing landlords.
Looking ahead, we believe this trend will only accelerate. Local authorities are becoming more proactive, fines are increasing and the introduction of the landlord database and mandatory ombudsman will raise expectations further still. For experienced, highly engaged landlords, self-management will remain a perfectly viable option. For many others, the balance between cost and risk is shifting rapidly in favour of professional management.
There's one final trend we'll be watching closely over the coming months, and it's one that isn't receiving nearly enough attention.
Artificial intelligence.
Whilst the Renters' Rights Act has rightly dominated the conversation, AI is quietly changing the balance of knowledge between landlords and tenants. Access to information has never been easier, and tenants are increasingly able to generate detailed correspondence, understand legislation and challenge poor practice with a confidence that simply wasn't possible a few years ago.
Professional landlords and agents should welcome that. Better informed tenants tend to create a better, more transparent sector.
For those relying on outdated knowledge or hoping that tenants simply won't question poor practice, however, the landscape has changed forever.
So where does that leave London's rental market?
In our view, it's in a good place.
Demand remains strong, the summer market is gathering pace and London continues to demonstrate exactly why it is one of the world's most resilient rental markets. However, we're also reaching the natural limits of affordability, which is why we expect future rental growth to be steadier than many forecasts suggest - perhaps around 3% per annum over the medium term rather than the extraordinary increases seen in recent years.
For investors, landlords and agents alike, success is becoming less about riding a wave of rising rents and more about understanding a market that is maturing, adapting and becoming increasingly professional.
The HomeLet figures tell us where the market has been.
The conversations we're having every day suggest where it's going.
And whilst legislation will continue to shape the industry, one thing remains true.
Human behaviour rarely changes as quickly as legislation.
What we'll be watching before next month's HomeLet Index
We'll be keeping a close eye on whether tenants continue bringing their search forward, how pricing strategies evolve through the peak summer market, and whether tribunal activity begins to increase as the Renters' Rights Act beds in. Just as importantly, we'll be monitoring landlord behaviour. If the past few months are any indication, compliance is rapidly becoming one of the defining themes of the modern PRS, and that's a trend we expect to continue long after this summer is over.
