London rents have seen record rises in a very hot spring market

The latest figures available from Rightmove show that London rents jumped by around 14 per cent in the last year, with some property experts calling it the ‘most competitive market on record’

Matt Hutchinson, a director at SpareRoom, the flat sharing website, has said:

“Rents are climbing across the country and are already reaching record highs in the majority of towns and cities. That’s going to be incredibly unwelcome news for renters, many of whom were already financially stretched and will be wondering how they’ll cope with increased rents, alongside a sharp hike in the cost of living.”

According to Rightmove’s statistics, rents in London are averaging well over £2,000 pcm, a figure that’s up from £1,900 or so last year. This represents the Capital’s biggest annual jump of any region since records began, the leading online property portal says.

In some parts of the capital rents have risen at an even faster rate, with properties in the West End seeing rents rise by just under 35 per cent and Chelsea just under 30% according to SpareRoom.

The Capital struggles through a sever shortage

Like many parts of the UK, the Capital struggles with a severe shortage of rental properties. Landlords are leaving and fewer new rentals are coming onto the market, coupled with a wave of renters coming back into the Capital as the Covid nightmare recedes.

In raw numbers, Rightmove claims that demand is up by around 8 per cent, while supply has fallen by 47 per cent.

All this is happening while the government is threatening major reforms in its Fairer Renting White Paper, reforms which at first sight are proving very unpopular with landlords.

There is a severe mis-match between the number of tenants looking for rentals and the vacancies available: according to Rightmove tenants looking for rentals outnumber the available vacancies by in the region of tree to one.

During the worst period of the pandemic there was a mass exodus from London, particularly among the traditional flat dwellers, young people who had the ability to return to live with their parents. Now, with the virus receding to some extent, and most having had their vaccines, the young renters are drifting back.

From the landlord’s point of view, it’s a complete about turn from when the pandemic hit London – a time of gloom when the market collapsed – and now the renters are returning and finding that vacancies are rare.

It’s got to the stage where in some parts of the Capital bidding wars are developing between tenants desperate to secure the right pad. Estate agents are even holding block viewings where renters are asked to bid against each other, the market is that tight.

However, all is not lost. Rightmove has said there there are signs that more rentals are beginning to come back onto the market to meet the demand. There was a 5 per cent increase in the number of new rental properties becoming available in March over January’s figures, and 16 per cent compared to the shorter month of February.

Demand – supply imbalance

Any increase in supply should start to stabilise rent levels and they may even start to slow the rate of rise next year. Hamptons International’s figures show that buy-to-let landlords are beginning to re-enter the market with over 40,000 homes added to the rental market across the UK in the first quarter, 2022.

Rightmove’s director of property data Tim Bannister has said:

“In the first three months of this year, we’ve seen tenant demand exceed the high levels set last year, which when coupled with the fewer available homes for rent, has resulted in the most competitive rental market we’ve ever recorded. There are several factors affecting supply and demand.

“On the supply side, we’re hearing from agents and landlords that tenants are signing longer leases, which has prevented some of the stock that would normally come back onto the market .”

Rightmove lists Swansea and Cardiff in south Wales, Manchester, Liverpool, Margate in Kent and Grantham in Lincolnshire as particular rental hotspots outside of the Capital.

Savills figures also confirm the exception prices increases with annual growth at around 13.5 per cent, the highest annual growth since 1998, even compensating for losses seen during the pandemic.

Jessica Tomlinson, a research analyst for Savills, has said:

“A combination of strong demand from those returning to London and a continued lack of stock in both the lettings and sales market, has meant that growth across the prime rental market has far exceeded any losses seen over the past two years.

“However, value increases are beginning to plateau after a huge run in areas that were most popular during the pandemic, with growth now more concentrated in areas that suffered the most over the past two years, which still have capacity for growth.

“Tenants today are much less fixated on the location and more focused on finding the right property – our agents have reported that it’s now not unusual to see prospective tenants looking in multiple locations across London.”

“While the market is certainly less panicked than it was last year, it is still being driven by people looking to secure a property early.

“Agents are reporting seeing students and families looking to find somewhere ahead of the new school term – activity they wouldn’t normally see until the third quarter.”

“A lack of stock remains an issue in the commuter belt, however, with just 31 per cent of agents citing that they have seen more come to market this quarter.

“As a result, when asked where demand was coming from, a third of our agents ranked ‘those who were unable to buy’ in their top two, beating ‘try before you buy’ which is typically a more common reason for renting in this market.”

Landlords are facing challenges ahead

With the reforms promised in the Fairer Renting White Paper, in particular the abolition of the no-fault no blame eviction process known as Section 21, and the up-coming costs involved in meeting more stringent statutory energy efficiency standards – EPC level C or above by 2025 – and further out, rising mortgage interest rates.

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