Rents rise and demand is high for rental properties in London UK

UK rent prices have risen by 6.7 per cent, year on year, according to a survey by the lettings platform Goodlord. London’s lettings market has also seen a strong performance over the past 12 months.

Over four years, the capital has experienced a series of economic shocks. Covid, Brexit, global conflicts, high inflation and most recently, the general election have created a mood of instability that has affected rent prices.

Now, as a new government takes power, it seems that confidence is returning. If you’ve delayed plans to rent out your house, now might be the time to take action.

As usual, our letting agents in Clapham and our Nine Elms letting agents have been working hard to update you on important rental market trends.

 

What’s the latest news on London lettings?

Over the past three years, rental values have risen by 23.1 per cent in prime London areas. This is the strongest three-year growth for twenty-five years.

 

The Office for National Statistics (ONS) reports that London was the region with the highest annual rent inflation. In the 12 months to February 2024, rent inflation rose to 10.6 per cent, the biggest annual percentage change since ONS research began in 2006.

The capital is currently recording an average rent of £2,086, compared with the lowest-rating region (the North East, with an average of £667).

 

A magnet for professionals

The city attracts professionals from all over the world in search of jobs and education, which helps to keep demand steady. Recently, a reduced number of rental properties in London, UK, has led to higher rents and increased competition for properties.

Although more rental stock is now coming onto the market, Zoopla reports that 15 applicants are currently chasing every property (more than twice the average prior to the pandemic).

That situation is unlikely to change significantly in the long term. The incoming Labour government has pledged to build 1.5m more new homes, but the impact in London will be negligible.  

There is always likely to be high demand for rental properties in the capital, especially in sought-after residential areas such as Battersea and Clapham.

 

Seasonal changes and void periods

Traditionally, more rental homes become available in the spring, but the supply decreases as demand builds between May and September.

June is considered to be the beginning of the peak season for rental demand, particularly for students securing accommodation for the start of term in September. The number of overseas students studying at UK universities has expanded recently, adding to the demand for student accommodation in London.

Void periods – when a property stands empty between tenants – are currently the shortest in London, with an average of 18 days against 28 days in the region where voids are longest.

 

Disillusioned first-time buyers

High mortgage costs since 2022 have made it much harder for first time buyers (FTBs) to take that initial step on the property ladder.

Mortgage rates are now beginning to fall, but for many FTBs the high cost of mortgages and the lack of affordable homes is still a barrier to home ownership.

In the year 2023/4 there were one fifth fewer FTBs buying property and this has kept more people in the private rented sector.

 

UK landlords are optimistic

The incoming government’s plans for the lettings sector appear to be broadly in line with the previous government’s policies, including the abolition of no-fault evictions. Other pledges include driving up renting standards and establishing minimum energy efficiency requirements by 2030.

These policies do not appear to be denting landlords’ optimism. A survey by Landlord Leaders found that 69 per cent of the landlords questioned intended to increase their property portfolios. A further survey by Landbay revealed that landlord positivity has increased by 10 per cent over the past year.

 

What do today’s tenants want?

The cost of gas and electricity remains high, so any steps taken to improve a rental property’s energy consumption will score well with potential tenants. Smart systems that control heating, lighting and security remotely are also in demand.

Despite trends that suggest more people are returning to the office, home office space is still highly valued. Finally, most tenants favour properties where appliances such as fridges and washing machines are provided by the landlord.

 

Will rents continue to rise?

It is estimated by some industry experts that in 2024/25 central London could see a further 4-5% increase in rental prices, driven by high demand and low availability of rental properties.

If you are thinking of renting out a property or purchasing a buy-to-let investment in Clapham or Battersea, we would be happy to help. Simply get in touch with our sales or lettings teams and let them know what you are looking for.