"We are seeing well-capitalised landlords and property entrepreneurs acquire additional units as some part-time landlords exit the market"
- Mandeep Dhillon - Investec
London's buy-to-let market is undergoing a significant shift. Smaller landlords are selling up, few of those properties are returning to the rental sector, and well-capitalised investors are beginning to move in to fill the gap.
New analysis from Investec shows landlords began exiting the London market after the Renters' Rights Bill was first proposed in September 2024, ahead of its introduction on 1 May 2026. The sharpest rise in former rental properties being listed for sale came in Q1 2025, when 50% of London homes on the market had been rental properties at some point in the previous three years, up from 32.4% in Q1 2024.
Crucially, many of those homes are not returning to the rental sector. Of properties bought in Q2 and Q3 2025, only one in ten were subsequently re-let, pointing to a genuine contraction in underlying rental stock.
Professional landlords move to acquire as smaller operators retreat
For well-funded investors, the retreating tide of part-time landlords is creating openings. Investec believes well-capitalised landlords, property firms and institutional investors may be better positioned to meet demand as the market becomes more stable and professional.
"We are seeing well-capitalised landlords and property entrepreneurs acquire additional units as some part-time landlords exit the market," said Mandeep Dhillon, private banker at Investec. "Typically, these clients have the administrative support and established processes to manage increased regulation, while diversified portfolios help spread income risk across multiple units."
In a more heavily regulated environment, operators with stronger processes, larger support teams and income spread across a portfolio rather than concentrated in a single property are better placed to absorb compliance costs and tenancy risk.
Co-living attracting investor interest
Investec's Future Living report points to growing investor interest in co-living as an alternative to traditional buy-to-let. The model typically favours those with the scale, funding and operational capacity to deliver it effectively. Among investors surveyed, 40% viewed co-living risk-adjusted returns as strong over the next five years, while 36% said the Renters' Rights Act would lead them to increase investment in the sector.
Rental listings rise even as stock tightens
London's rental listing numbers remained elevated in Q1 2026 at 113,707, up 15.5% on Q1 2024 and 18% on Q1 2025. More homes are circulating through the market, but that churn masks the underlying contraction in available stock rather than reflecting genuine supply growth.
Rents, meanwhile, have held broadly steady. Median rents stood at £2,200 in both Q1 2024 and Q1 2025, edging fractionally lower to £2,197 in Q1 2026. Affordability pressures appear to be keeping a lid on rental growth even as supply remains constrained.
Dhillon pointed to the implications for landlords who stay the course. "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."
Prime London showing early signs of strain
Beyond the rental market, Investec's Property Index 2026 suggests parts of prime London are coming under pressure. Nearly 7,000 homes priced at £1m or more were listed in 2025, up 12% on 2024, with asking-price reductions deepening in locations including St John's Wood, Knightsbridge and Bayswater.
With demand continuing to outstrip supply in the rental sector, and regulatory complexity increasing, the direction of travel appears clear: London's private rented sector is gradually consolidating around larger, more professional operators, while those without the resources or appetite to adapt are stepping away.
