As geraniums bloom in the capital’s window boxes and the Royal Parks explode with summer colour, the central London rental market is also enjoying a burst of renewed vitality.
In sharp contrast to the challenging market conditions we experienced during the pandemic, recently demand for rental properties has significantly exceeded supply.
Here we explore the reasons why London lettings are enjoying a renaissance. We also publish the latest update on the London lettings market by our Head of Lettings, Matt Staton, which offers some good news for both renters and landlords.
A Struggling Market
A year ago, the London rental market was struggling to recover from the challenges of the pandemic. International students had returned home, overseas visitors had disappeared, and many of the capital’s business premises were closed.
Meanwhile, Londoners tired of successive lockdowns had moved away from central areas in search of larger properties with more indoor and outdoor space.
The result was a raft of empty properties in prime central London areas, and rents dropped accordingly. According to Rightmove, by March 2021, the average rent in central London areas such as Knightsbridge and Notting Hill had fallen by 17% to 19%, respectively (set against March 2016 figures).
The seriousness of the situation forced some landlords to sell their properties, leaving fewer homes available to rent.
Why is the Demand for Rental Properties So High?
More recently, the cost of living squeeze has encouraged tenants to stay on in their rented properties, to avoid higher rents and moving costs. These factors have prevented normal levels of rotation within the market, causing central London rental prices to rise.
Last month, Matt Staton reported that demand for rental accommodation in the capital had risen by 40%, while the amount of available rental accommodation had dropped by 60%.
The huge surge in applicants looking for properties to rent in London is mainly due to the high demand that built up during the pandemic. Renters were reluctant to move for a variety of reasons, including job insecurity. Recently, however, they have been returning to the market in large numbers.
Are Rental Properties Still in Short Supply?
In his video update, Matt Staton comments that there are now more rental properties coming on to the market, as more landlords are willing to let properties and more tenants are deciding to move on. In particular, those tenants who found homes last year when prices were already starting to recover, are now starting to move on and look for new properties.
This should improve rotation in the lettings marketplace, leading to more choice for tenants.
What is the Future of the London Rental Market?
The shortage of new rental properties coming to market has pushed rental growth to 28.3 per cent. Rents are currently 5.6 per cent higher than the previous peak, recorded in 2018.
This year, lack of available stock is likely to underpin further rental growth in prime central London areas. However, the rising cost of living may eventually cause rental levels to settle.
Despite challenging financial headwinds and the current geopolitical uncertainty, there are reasons to feel optimistic about the prime London lettings market. In a recent ‘Rent Expectations’ survey by the Royal Institute of Chartered Surveyors (RICS), 59% of respondents said they anticipated further rental growth.
The increased availability of properties and the strong rental returns we have achieved through our lettings networks is positive news for tenants and landlords alike. If you want to let your property, or are considering a buy-to-let investment, or need help finding your ideal new home in a competitive marketplace, we would be delighted to hear from you.
Why not get in touch with one of our experienced property specialists and let them know what you are looking for?
