London rents soar past £2,300—what next?

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This is Chubby Wallet. The newsletter that teaches you how to profit from property trends before they go mainstream..

Here's what’s in store..

• General market update

• Whats happening with the rental market?

• UK Build To Rent update

• A quick guide to managing refurb projects

The UK property market has entered a phase of measured stability, characterized by steady transaction volumes .

Week 33 data reveals a market finding a balance between supply and demand pressures.

Chris Watkin's market analysis points to shift from the volatility of recent years toward what he describes as "sideways" movement - a market that's working but not booming one way or the other.

Current market dynamics

• New listings: reached 33,400 in Week 33, representing just 3.3% growth above 2024 levels and 7.2% above pre-pandemic baselines. Current inventory stands approximately 10% above historical averages - elevated, but not at crisis levels.

• Price discovery accelerating: The data reveals 14.1% of properties underwent price reductions in July, substantially above the 5-year average of 10.6%. This translates to approximately 90,000-95,000 monthly price adjustments nationwide.

•  Transaction volumes: Perhaps most significantly, 25,300 properties achieved "sold subject to contract" status, marking a 6.8% year-on-year increase. This demonstrates underlying market resilience despite broader economic uncertainties.

Interest rate environment

The narrative around falling mortgage rates requires careful examination.

According to Adam Lawrence of Propenomix, - 2-year fixed rates have declined and 5-year gilt yields have reached levels not seen since the 1990s, closing the week at 4.111%.

Given that the majority of serious property transactions involve 5-year fixed mortgages, this disconnect presents a major challenge.

The bond market's pricing of long-term risk suggests bigger investors are concerned about inflation persisting.

For property markets, this creates a tension between short term optimism and long term financing reality.

Affordability

Despite absolute price levels remaining elevated, relative affordability has improved markedly.

The gap between average first-time buyer asking prices and what single earners can afford on 4.5x salary multiples has narrowed significantly.

This reflects both wage growth and more realistic pricing by vendors.

However, household cost inflation running at 3.9% - well above general CPI - continues to pressure disposable incomes.

Private renters face particular strain with costs rising 4.5% year-on-year, while even outright owners see 3.4% increases in running costs.

Policy landscape

Government intervention risks are mounting. Proposals to extend National Insurance to rental income could fundamentally alter investment property economics, potentially reducing supply precisely when housing shortages persist.

With the Renters' Rights Bill progressing without rent controls, such tax changes could drive significant portfolio liquidation.

Meanwhile, the Right to Buy program continues its decline, with only 7,494 sales generating just 3,593 replacement units - a 48% replacement rate that worsens social housing shortages.

London under pressure

London's premium is facing sustained pressure. August asking prices fell 2.6%, with year-on-year declines of 1.6%.

Westminster Borough experienced a particularly severe 7.9% annual reduction. 

Conversely, Wales and Scotland maintain modest growth, suggesting regional markets are increasingly disconnected from national trends.

Looking ahead

September activity levels will provide crucial insights as the market emerges from summer holidays.

Historical patterns suggest increased activity and inventory clearance, but this year's elevated stock levels may create different dynamics.

Key factors to monitor:

• Bond market stability and its impact on mortgage availability

• Government policy direction on property taxation

• Regional divergence patterns and their implications

• Supply-demand balance as seasonal factors normalize

For market participants, this environment rewards disciplined analysis over speculation.

Property transactions are completing, but at prices and terms that reflect economic reality rather than pandemic-era excitement.

Is the UK rental market heating up?

August's data tells a story that's more nuanced than the headlines suggest.

The numbers don't lie

Think of rental prices like a pendulum that's been swinging for months. August saw that pendulum slow slightly—rents dropped 1% from July's record high of £1,496 to £1,480.

But here's the twist: this "cooling" still leaves us at the second-highest rental average in recorded history.

South East smashed through the £1,600 barrier (up 11%) London edges closer to £2,400 territory at £2,322 (up 5.5%) North West takes a 20% tumble after July's artificial spike

The supply-demand equation is showing cracks

Void periods—the period between tenancies—stretched from 12 to 15 days. In retail terms, that's like products sitting on shelves slightly longer.

It suggests the market's internal pressure is equalizing, but barely.

Why this matters: Longer voids signal either:

• Tenants becoming more selective (demand softening)

• Landlords overpricing (supply/pricing mismatch)

• Seasonal adjustment (normal market rhythm)

The smart money says it's a combination of all three.

What’s ahead?

The CEO of Goodlord mentioned "pivotal next six months" ahead.

Three major catalysts are driving this:

• Gov regulation: The Renters' Rights Bill isn't just another policy tweak. It's a fundamental rewiring of landlord-tenant dynamics. Think of it as changing the rules of chess mid-game.

• Potential tax rises: Autumn budget changes for landlords could trigger a supply shock. If buy-to-let becomes less attractive, where does rental supply come from?

• The interest rate reality: While not mentioned in the data, mortgage rates remain elevated. This creates a feedback loop—higher borrowing costs mean higher rental yields needed, which pushes rents up.

The Forward Play

Three Scenarios are likely:

• Scenario 1: Rents stabilize around current levels, void periods normalize, regulatory changes get absorbed gradually.

• Scenario 2: New regulations + tax changes = landlord exodus = rental shortage = price spike.

• Scenario 3: Economic headwinds + affordability limits = tenant resistance = genuine price correction.

Which scenario wins?

The one that best navigates the intersection of policy, economics, and human behavior.

Whether you're a landlord, tenant, or investor, the next six months aren't just "interesting"—they're potentially transformative. 
The market is signaling a transition, but the direction isn't clear yet. The question isn't whether change is coming. It's whether you're positioned to adapt when it arrives.

The Build-to-Rent sector just got a potential game-changer that could dwarf everything we think we know about UK housing investment.

The numbers..

While everyone's been watching interest rates and planning reforms, institutional money has been quietly flooding into Build-to-Rent like never before.

H1 2025 delivered nearly £1.8 billion in BTR investment—slightly ahead of 2024's pace and building serious momentum.

But here's the real story: Savills received over £5.2 billion in BTR bids during the first half of 2025.

That's not just investor interest—that's intense competition. When bid volumes outstrip actual investment by nearly 3:1, you're looking at pent-up capital desperate for deployment.

The sector's scale is reaching critical mass:

• 130,000+ completed BTR homes (up 12% year-on-year)

• 51,000 homes under construction

• 110,000 homes in planning pipeline

• Total sector size: 291,000 homes

Think of it like compound interest hitting the hockey stick phase—we're approaching the point where institutional scale meets market need.

The £300B question nobody's asking

Local Government Pension Schemes sit on £300 billion in assets across England and Wales.

Currently, they allocate just 4% to real estate.

Compare that to international norms: Australia, Canada, Switzerland all allocate over 10% of pension assets to real estate.

The US, Finland—same story. Britain is massively underallocated.

If UK pension funds matched Australia's 15% real estate allocation, that's an additional £45 billion available for UK real estate investment.

The construction reality check

Consider this sobering fact: BTR starts in H1 2025 were 47% lower than the 2018-19 average…

High build costs, financing challenges, planning delays, regulatory uncertainty—the entire construction ecosystem is under pressure.

Buildings over 18 meters are particularly stuck in Gateway 2 processes, forcing two-thirds of new BTR schemes below 18 meters just to get built.

Three Critical Bottlenecks to Watch

• Bottleneck 1 - Liquidity Trap: Pension funds need to free up capital tied up in other real estate assets. Weaker economic climate means less liquid investment markets.

• Bottleneck 2 - Capacity Gap: Even with unlimited capital, who builds the homes? Construction capacity is already stretched, skilled labor is scarce, and planning systems are overloaded.

• Bottleneck 3 - Policy Uncertainty: Will the regulatory environment support or hinder large-scale institutional investment? Tax treatments, planning reforms, and rental regulations all impact investment calculations.

The scale advantage nobody talks about

Here's what individual buy-to-let landlords can't compete with: systematic scale. When pension funds deploy capital, they're not buying one property—they're funding entire developments, master-planned communities, integrated infrastructure.

The institutional advantage:

• Long-term investment horizons (decades, not years)

• Professional management capabilities

• Capital to ride out regulatory and economic cycles

• Ability to integrate housing with broader infrastructure investment

This isn't just more money—it's different money, with different behaviors and different risk tolerances.

Bottom Line

• For Developers: Get ready for institutional partners with deeper pockets and longer time horizons. But also prepare for more sophisticated due diligence and return expectations.

• For Existing BTR Players: First-mover advantage matters, but scale will become the dominant competitive factor. Partnerships and consolidation may become survival strategies.

• For the Market: When institutions own significant rental stock, everything professionalizes—management, maintenance, tenant relations.

Refurbishment is rarely cheaper than new build. To avoid costly surprises, start with these cost benchmarks (per m²): for your site area. But complete cost breakdown will also depend on hidden issues like rot, outdated wiring, or asbestos.

Expect the unexpected

Refurb projects often uncover costly problems. Spend on surveys upfront—structural, asbestos, electrical, and damp—to avoid big financial shocks later.

Prioritize foundations over finishes

Focus first on expensive hidden work: structural repairs, damp-proofing, rewiring, replumbing, roof. Cosmetic updates like kitchens and decorating come later.

Contingency should Be Higher

Forget 10% contingency; realistic buffers are 20-25% for Victorian, 15-20% for post-war, and 30%+ if not fully surveyed.

Get and Compare Three Detailed Quotes

Never accept the first or cheapest quote without breakdowns. Verify contractor experience and insurance.

Coordinate Trades to Avoid Costly Rework

Plan the sequence carefully: structural → services → finishes. Avoid trades undoing each other’s work.

Watch Out for Hidden Cost Multipliers

Planning fees, material delivery challenges, matching older materials, and listed building constraints can all spike costs.

Realistic Timelines Are Crucial

Add extra time for planning, weather, delays, and problems. Over-optimism leads to budget blowouts.

Know When to Walk Away

Quit if major foundation issues, asbestos, or planning restrictions make costs approach 80%+ of new build alternatives.

Bottom Line

Refurbishment means managing risks, budgeting for reality, and planning for things to go wrong—because they always do.

That's it for this week folks. Each week we'll cover strategies, updates and insights to help you succeed in real estate. We love this stuff!

If you Have questions or just want to chat, We want to hear it.

See you next time in your inbox!

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