London’s lettings market is pulling in two different directions, and there are two numbers that prove this point, new research indicates.
According to Rightmove listings data, the number of tenancies agreed across London in the three months to August was 8% lower than a year earlier. Over the same period, the number of super-prime tenancies started – lets above £5,000 per week – ran 13% above its five-year average.
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Conventional intrepretation says the top of the market is insulated from the pressures squeezing everything beneath it, but a more useful reading suggests the capital’s super-prime rental market has become a holding pen for people who intend to buy, and those do not.
It’s also one where a bullish lettings statistic is being used to prove a bearish sales market.
The supply constraint doesn't apply at the top
New listings across Prime Central London (PCL) and Prime Outer London (POL) ran 10% below their five-year average in the three months to August, according to Rightmove listings data analysed by Knight Frank’s Head of UK Residential Research, Tom Bill. As he states, new supply has not exceeded its five-year average since April 2021.
Successive tax and legislative changes have eroded the economics of letting for private landlords, culminating in the Renters’ Rights Act, which took effect in May and tightened the rules on rent collection and increases while reforming the possession process.
The squeeze is real and it’s also not evenly distributed. Listings above £1,000 per week ran 13% above their five-year average over the same three months, which means discretionary owners at the upper end are letting property rather than sell it into a weak market, with a significant number choosing to follow suit.
Stock at the top end is not scarce but abundant, and is so, precisely because its owners have stopped trying to sell. That distinction changes how the rest of the data reads. Knight Frank’s headline framing of a supply-constrained lettings market is accurate for the mainstream prime market but harder to follow for the market’s upper echelons.
The deferral trade
The demand-side picture confirms the split. Average rents rose 3% in POL in the year to August, against a more modest 1.2% in PCL.
In August there were 8.7 new prospective tenants for every new listing in POL – the highest ratio in five years – compared with 5.2 in PCL. The competition is fiercest where the stock is thinnest, which is not at the top.
What is happening above £5,000 per week is a different transaction entirely. The abolition of non-dom status, the higher additional rate of stamp duty and unresolved speculation about wealth taxation have not removed high-net-worth demand from London.
Instead, they have redirected it from purchase to tenancy. Tom Smith, Head of Super-Prime Lettings at Knight Frank, describes prospective buyers “opting to rent for a further 12–24 months,” as they “adopt a wait-and-see approach”.
Twelve to 24 months is a specific claim and one worth testing as it implies a reservoir of committed buyers who will eventually transact. The alternative interpretation – which this market is a departure lounge rather than a waiting room – produces a very different forecast for 2027 and 2028.
Beauchamp: same direction, blunter instrument
Savills’ prime lettings indices complicate the resilience narrative in two ways. The first concerns pricing power. Savills recorded PCL rents rising just 0.4% over the second quarter of 2026, against 1.2% in POL, characterising the trend as a slow accumulation of gains rather than a surge.
More pointedly, the agency says annual rental growth to the end of June ran at 3.2% for properties let below £500 per week and only 1.2% for those above £3,000 per week. Tenancy volumes at the top are rising while pricing power at the top is the weakest in the market – which is what absorption of ample stock looks like, not scarcity.
The second is structural: Savills argues that much PCL rental stock is held by large estates and long-term international investors, owners considerably better placed to absorb regulatory change than the smaller, debt-dependent landlords exiting the mainstream.
“Much of PCL rental stock is held by large estates and long-term investors, owners considerably better placed to absorb regulatory change than the smaller, debt-dependent landlords exiting the mainstream”
It also notes that a higher proportion of PCL stock sits above the Renters’ Rights Act threshold of £100,000 in annual rent, and therefore outside the legislation’s reach altogether. The supply shock that has reshaped the rest of the market largely bypasses this segment its owners transact in.
There is a third data point, and it carries a date caveat. In the first half of 2025 – a full year before the figures above – Savills recorded an 18% annual increase in PCL tenancies of six months or less, alongside a rise in super-prime renters aged 40–60 to 65% of the cohort, up from 59% in 2024.
Short tenancies and a two-year deferral are not the same behaviour, however, and whether that gap has narrowed since is not yet visible in the published data.
The arithmetic of waiting
Beauchamp’s sales forecast supplies the missing piece. The firm expects London homes above £15 million to soften by 2% to 3% across 2026, with no return to positive growth until 2027 at the earliest.
Set that against a two-year rental commitment and the deferral stops looking like hesitation. Indeed, a buyer who expects the asset to be cheaper in 18 months and who faces a higher stamp duty bill on entry is not one waiting for confidence to return.
Instead, they’re waiting for a price floor, and paying £5,000 a week for the option to buy it when it appears. This could be considered a rational trade, not a nervous one, as it means the reservoir is unlikely to drain on sentiment alone.
Over the next 12 months, eagle-eyed investors will be looking at the far end of those tenancies, to assess whether a wave of deferred purchases land into a market that has already repriced, or a cohort that renews once, then leaves.
For those running those forecasts, the published data does not yet distinguish between them. That’s why watching tenancy duration and renewal rates – not headline volume – will give a clearer indication of where the segment is headed in a further year-and-a-half.
