Tenant Demand Remains Stable Despite Seasonal Fluctuations

London’s private rented sector has started 2026 on a firm footing, with rental growth supported by restricted supply and sustained tenant interest. Chestertons reports that tenant enquiries in January were 6% lower than the same month in 2025 but 81% higher than December 2025, indicating renewed activity following the usual festive slowdown. The number of renters securing homes increased by 15% year-on-year, highlighting a healthy pace of lettings transactions across the capital.

Adam Jennings, Head of Lettings at Chestertons, commented: “Our latest figures show tenant demand remains stable, supported by strong corporate interest, while rental supply continues to be limited in certain areas. This combination is keeping the London lettings market highly competitive, with properties priced in line with the market attracting multiple enquiries from high-quality tenants.” He added that with demand expected to rise towards spring, landlords should consider bringing properties to market now.

Rental Supply Remains Constrained

Available rental stock in London remains tight, with listings down 4% compared to the previous year. This shortage of supply is contributing to a competitive lettings environment, pushing rents and returns higher. Chestertons also notes that lettings valuations have doubled month-on-month, suggesting that more landlords are considering entering the market in the first quarter of 2026.

For landlords, this constrained supply means less competition among landlords and increased tenant interest, which can translate into stronger rental yields. However, it also highlights the importance of pricing properties appropriately to attract multiple enquiries and secure reliable tenants quickly.

Industry Surveys Reflect Market Conditions

Chestertons’ findings align with the recent Royal Institution of Chartered Surveyors (RICS) residential market survey. The RICS survey found a net balance of 27% more agents reporting tenant demand falling rather than rising, alongside a net balance of -39% for landlord instructions, reflecting the ongoing contraction in rental supply.

RICS forecasts rental growth of around 3% for 2026, while property portals Rightmove and Zoopla expect increases of 2% and 2.5%, respectively. These projections reinforce the trend of rising rents amid limited availability, underscoring the competitive nature of the London PRS.

Signs of Recovery in London Home Sales

Alongside rental market strength, Chestertons reports early signs of recovery in London’s home sales following political and fiscal uncertainty late last year. January 2026 figures show buyer interest returning, with portal enquiries just 6% below January 2025 levels and a 96% increase compared to December 2025. Viewing numbers also rose by 101% month-on-month, signalling renewed engagement from prospective purchasers.

This resurgence in sales activity may have implications for landlords considering selling properties or adjusting their portfolios, as market confidence appears to be improving.