Landlords exiting the London rental market are creating new opportunities for bridging lenders and professional investors as stock shifts out of the private rented sector.
Analysis from Investec Bank shows that in Q1 2025, 49.9% of homes listed for sale in London had been rental properties within the previous three years, up from 32.4% in Q1 2024.
A large proportion of these properties are not returning to the rental market, with only around one in ten homes purchased in Q2 and Q3 2025 subsequently re-let, pointing to a contraction in underlying rental supply.
At the same time, listing volumes remain elevated, with more than 113,000 rental listings recorded in Q1 2026, highlighting increased churn and repositioning of assets.
TIGHTER MARGINS
The shift came ahead of the Renters’ Rights Act 2025 (implemented today) and reflects mounting pressure on landlords from regulation, higher borrowing costs and tighter margins.
A likely result will be increased demand for short-term finance to facilitate acquisitions, refurbishments and repositioning of former rental stock, particularly as smaller landlords exit.
The data suggests a growing role for well-capitalised investors and property entrepreneurs, who are better equipped to deploy bridging finance and scale portfolios in a more regulated environment.
Stabilising rents, which have held at around £2,200 per month, also point to affordability constraints, reinforcing the need for value-add strategies rather than reliance on rental growth alone.
INCREASED REGULATION
Mandeep Dhillon (main picture, inset), Private Banker at Investec Bank, says: “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.
“We are seeing well-capitalised landlords and property entrepreneurs acquire additional units as some part-time landlords exit the market.
“Typically, these clients have the administrative support and established processes to manage increased regulation, while diversified portfolios help spread income risk across multiple units.”
