How the current global climate is shaping the capital’s property market

There is rarely a dull moment in property, but the current climate has brought a different kind of intensity to the market. The headlines may be global, but the impact is being felt closer to home.

For landlords, tenants and investors across London, the question is less about what is happening overseas, and more about what it means on the ground here in the UK. London, as ever, sits at the centre of it all.

A QUICK ANALYSIS

The sales market has slowed, pricing is still edging up, but only marginally, and buyer demand has cooled compared to last year. Rightmove’s recent data showed London asking prices rising by just 0.5%. It is likely that confidence, more than anything, is driving behaviour. When the wider economic picture feels uncertain, big decisions tend to slow down. Buyers hesitate, sellers adjust expectations, and transactions take longer to come together.

The rental market is telling a different story. Demand remains consistently strong, not because conditions are ideal, but because alternatives are limited. Higher mortgage costs and tighter affordability have pushed many would-be buyers to remain in rented accommodation for longer. At the same time, some landlords are choosing to exit the market, while others are becoming more selective.

Despite this, the rental market continues to hold firm.

LANDLORDS UNDER SIEGE

For landlords, the pressure is coming from multiple directions. Mortgage costs remain elevated compared to recent years, while maintenance, compliance and general operating costs have all increased. Margins are tighter, and the environment is less forgiving than it once was. For many smaller landlords in particular, the economics are no longer as straightforward or as obvious as they used to be.

Layered on top of this is a significant shift in legislation and taxation. The Renters’ Rights Act has fundamentally changed the structure of the private rented sector, increasing tenant security but placing greater responsibility on landlords. There is no escaping the impact, and at the same time, tax changes – from stamp duty to income tax treatment – have further skewed the financial equation.

THE LABOUR GOVERNMENT TWISTS THE KNIFE

It would be hard to overstate how much the fiscal environment has shifted for landlords under the current Labour government. The changes, both implemented and incoming, are substantial.

Stamp Duty on second homes rose from 3% to 5%.
Section 24 introduced under the previous government but now fully embedded, means landlords pay income tax on gross rental income before deducting finance costs, resulting in significantly higher tax bills for mortgaged landlords.
Capital Gains Tax allowances have been slashed.
Furnished Holiday Lets have lost their preferential tax treatment.
Non-dom reforms have dampened international investment appetite in prime London. And from April 2026, Making Tax Digital for Income Tax (MTD ITSA) becomes mandatory for landlords with qualifying gross income above £50,000, requiring quarterly digital reporting to HMRC.
Income tax thresholds are frozen until 2031/32. As rents rise in line with inflation, more landlords are being dragged into higher-rate tax bands without any change in headline rates – a classic fiscal drag.

Individually, each change is manageable. Taken together, they represent a meaningful shift in how property investment works in London.

CAUSE AND EFFECT

We are already seeing the effects of global and economic instability paired with radical changes in legislation closer to home. Some landlords are selling up, others are restructuring portfolios or moving towards a more professional, fully managed approach. There is a gradual move away from casual or accidental landlording towards a more deliberate, business-minded model.

For tenants, the picture is mixed. Greater security and improved standards are positive steps, particularly in well-managed properties. However, the potential for a reduction in supply, as a result of the Renters’ Rights Act shake-up, remains a concern. When landlords leave the market, it inevitably tightens availability, which impacts rental values over time.

In prime central London, the dynamics are slightly different again. Values remain below their previous peaks, and this has created pockets of opportunity for buyers with a long-term view. At the same time, high-net-worth individuals are increasingly choosing to rent rather than buy, favouring flexibility in a shifting tax and regulatory environment. This has strengthened demand at the top end of the rental market, even as sales activity remains subdued.

FOSTERING GOOD TENANT RELATIONSHIPS

Given that rental accommodation will always be an important part of London housing provision, it is vital to adapt to the changes brought about by the RRA. MIH aims to foster long-term relationships with tenants to encourage commitment and stability, as opposed to transience, i.e. tenants who leave after a short time, notwithstanding that the Landlord may have spent a vast amount on redecorating the flat and undertaking repairs etc. We will be looking at what can be done to mitigate some of the problems that will be created by the new legislation, in the spirit of Landlord/Tenant equilibrium. It must be a win/win situation to be sustainable.

FUTURE CHALLENGES

Another factor quietly approaching is energy efficiency. Proposed EPC requirements will require many landlords to invest in upgrades over the coming years. While this is not an immediate deadline, it is a near-term consideration, particularly for those managing multiple properties. Early preparation will make a material difference.

SO WHERE DOES THIS LEAVE LONDON?

Despite everything, the fundamentals remain intact. Demand for housing in the capital is not going anywhere. Population growth, limited supply and London’s global appeal continue to underpin the market. What has changed is the level of complexity. The margin for error is smaller, and the need for informed decision-making is greater.

OPPORTUNITY KNOCKS

For landlords and investors who take a long-term view, there is still opportunity – but it increasingly favours those who are well-advised, well-prepared and professionally managed. The landscape is evolving, and those who adapt to it will be the ones who benefit.

At MIH, that is exactly where we position ourselves: helping clients navigate change, maintain standards and protect value, regardless of the wider climate. The change is unavoidable. Navigating it doesn’t have to be.