Supply Still Woefully Behind Demand in the Lettings Sector: What London Landlords Need to Do Now
The lettings market continues to favour tenants heavily, with nine prospective tenants chasing each available property as of September 2025. This imbalance is driving rent rises and a slight increase in arrears, while sales transactions face delays. London landlords must strategically manage pricing, compliance, tenant communication, and sales planning to protect income and ensure smooth operations.
Persistent Supply Shortages: What the Numbers Tell Us
Recent data from Propertymark as of September 2025 reveals a stark imbalance in the lettings sector: each available rental property faces competition from nine prospective tenants. This intense demand-supply gap is pushing rents upward, with 16% of letting agents reporting rent increases, and contributing to a slight rise in rental arrears. While this dynamic benefits landlords in terms of pricing power, it also introduces operational and compliance challenges.
On the sales side, demand and property viewings are increasing, but transaction times are stretched, with over a third of sales taking more than 17 weeks to complete. This friction in sales markets often delays portfolio adjustments or acquisitions for landlords.
Why This Matters to London Landlords
London’s rental market is particularly affected due to its large, diverse tenant pool and chronic housing shortages. Whether you manage a single flat, an HMO, or a sizeable portfolio, understanding these pressures is crucial:
- Pricing Pressure: Rising rent levels can boost income but risk pricing out quality tenants or increasing arrears.
- Tenant Competition: High demand means landlords must be vigilant in complying with tenant selection laws to avoid discrimination claims.
- Operational Strain: Managing multiple applications per property requires robust processes to maintain fairness and compliance.
- Sales Delays: Longer completion times can impact cash flow planning, especially for landlords relying on sales to fund purchases or refurbishments.
Practical Steps for Landlords
1. Review and Adjust Rent Pricing Strategically
Avoid knee-jerk rent hikes. Benchmark rents against local comparables to ensure competitive yet fair pricing. Use recent letting agent reports and portals like Rightmove or Zoopla for up-to-date local data. Consider gradual increases aligned with market rates to minimise arrears risk.
2. Enhance Tenant Selection Processes
Document your tenant screening criteria clearly and apply them consistently. Keep records to demonstrate compliance with anti-discrimination laws under the Equality Act 2010. Given high applicant volumes, consider pre-screening questions or automated tools to manage interest efficiently.
3. Communicate Transparently With Prospective Tenants
Set expectations about the competitive market and your selection process to reduce frustration. Clear communication can improve applicant experience and reduce disputes.
4. Monitor Rental Arrears Closely
With arrears on a slight rise, establish early contact protocols for missed payments. Consider flexible payment plans while balancing your financial needs. Early intervention can prevent escalation and costly evictions.
5. Plan for Extended Sales Timelines
If you are buying or selling property, anticipate delays over 17 weeks. Factor this into cash flow and portfolio strategies. Liaise closely with solicitors and agents to expedite where possible.
Tailoring Approach by Landlord Profile
- Single-Unit Landlords: Focus on competitive pricing and tenant communication, as each tenancy impacts your income directly.
- HMO Operators: The volume of applicants may necessitate more sophisticated screening systems and robust compliance checks.
- Portfolio Landlords: Consider dedicating resources to market analysis and cash flow modelling to manage rent and sale timing risks.
- Accidental Landlords: Seek professional advice on pricing and tenancy management to avoid pitfalls in this tight market.
Next Steps This Month
- Conduct a rent review based on local market data.
- Audit your tenant screening documentation and processes.
- Update tenancy communications to reflect current market conditions.
- Set up arrears monitoring routines with your letting agent or property manager.
- Consult your solicitor about expected sales transaction times if you plan to buy or sell.
How Rentals & Sales Can Support You
Our team offers tailored portfolio reviews, compliance audits, and pricing strategy consultations designed for London landlords facing these market pressures. We help you balance income optimisation with tenant relations and legal compliance to protect your investment.
Compliance Disclaimer: This article does not constitute legal advice. Landlords should consult professionals for advice tailored to their specific circumstances and keep updated with official guidance.