Kate Eales
Head of Regional Residential Agency
London’s letting market is gathering pace again, where according to the latest Prime London Lettings Index from LonRes, rents rose by an average of 1.9% in Q4 of 2018 due to higher levels of demand from tenants.
It is often the case that in times of uncertainty the lettings market can receive greater demand than residential sales. Over the past two years, we have been seeing people renting out homes that they have struggled to sell, or moving into rental accommodation in the short term because they have found a buyer for their house and don’t want to lose them.
The slowdown in the London sales market in 2016 and 2017 saw the lettings market flooded with new properties for rent, and this increase in supply led to a decline in rental prices. Many properties that went to the lettings market 18-24 months ago have now gone back onto the sales market, which is starting to move again, albeit with adjusted prices.
Meanwhile, hikes in buy-to-let taxes and increased regulation have also had an impact. The number of rental properties on the market in London fell by 22 per cent in 2018, according to Rightmove. UK Finance’s figures show that there were 5,100 new buy-to-let mortgages completed in December 2018 (most recent data released) showing a decline of 5.6% year-on-year. Falling supply leads to more competition and Rightmove’s data shows that average London rents rose to an all-time high of £2,034 per month in the final quarter of 2018.
When the Tenant Fee Act coming into force in June, it is likely more tenants may move home as the costs of doing so will be lower. Landlords can pre-empt this to avoid losing good tenants by checking that they’re happy with their rental and address any concerns.
Of course, political changes are not the only driving force for those choosing to rent rather than buy. Families who want to secure school places in the best catchment areas and professionals who are changing jobs will often look to rent for the flexibility it affords.
It’s a combination of these factors which has instilled a new energy into the London lettings market in recent weeks and we are forecasting rental prices to rise 1.5% in prime London over the course of 2019