London Rental Market Update – A Great Time for Landlords

November 4, 2021
London Rental Market (1)

A year ago, I reported that London rents are falling. Well, what a difference a year makes as the tables have turned and the rents in London have been on a tear.  

Through November 2020, London rents had declined on average of 5% compared to the previous year. Average rents in London were approximately £1596, and as we were in the midst of the global pandemic, which caused 3 primary factors that decimated demand in the rental sector:

1.    Decline in foreign students coming into the UK & London due to travel restrictions and schools operating online.

2.    Lack of tourists as well as exodus of office workers & lack of multinational firms sending over staff

3.    In addition, you have a glut of supply as landlords shifted their short-term rentals to long term lets because of little short term demand. 

 Well, now times have changed as we are all learning to live with the pandemic and London is opening up again. We’ve seen universities return to in person learning, international travel resume, and multinationals sending staff over to work in the city once again. One other key point on the student population is that you have 2 years’ worth of students coming back as many last year were on remote learning which means an even greater influx of renters to London. Meanwhile you’ve had some landlords sell up during the pandemic taking advantage of the stamp duty holiday and cashing out as taxes become more punitive on their portfolios. 

Now with all that demand and less supply, the result is that the cost of renting a home in London was 3.6% higher this summer than last year (according to the latest rental tracker from Rightmove).  Article source

Things have shifted pretty quickly because in the second quarter of 2021 rents had slid by 3.1% on an annual basis but reversed in the 3rd quarter as people started to drift back into the office.

There is strong rental and housing demand as people return to the cities for work, culture and lifestyle. Young professionals that went back home are returning, as so many of us want to be able to go out and enjoy culture at our doorsteps.  

Here’s a summary of the statistics of the London rental market in November 2021:

  • In 3rd quarter 2021, rents rose on the previous year
  • 5.6% in central London to £2,348
  • 1.7% in outer London to £1,777
  • Average asking rent for London: £2,019
  • National asking rent: £1,047

 Rental supply is the lowest in almost a decade and the imbalance is the most acute in London where enquiries to rent are up 165% this autumn compared to last year. In fact, LonRes has 2,800 properties register for rent versus 13,000 this time last year.

Most of the demand is coming from those who moved back home with parents or shared with friends during the pandemic and lockdowns. 2021/2022 new university undergraduate intake, along with those who were studying remotely last year. As well as international students are returning too. (source

We are now seeing rent increasing on existing tenants and bidding wars for new tenancies. I have even seen that some properties are getting up to 50 enquiries on a single advertised let. Properties being snatched up sight unseen and others are going well above asking price. For one of my landlords, we are now achieving £5200 per month on a new tenancy versus £4700 that the old tenant was paying – this is a massive difference for the landlord and the tenants. 

A two-bedroom flat in Bloomsbury priced at £3,467 a month — £433 a month more than the rent agreed pre-Covid — attracted 20 viewings in a day and was agreed at £4,225 a month.

Graph 1

Last month, 22,000 flats came on to the lettings market in inner London, according to the consultancy TwentyCi. Although this is similar to the number of new listings in September 2018 and 2019, last month 65% of available flats found a tenant, up from 55% in September 2018 and 60% in September 2019.

Continued Housing Shortage

The current market dynamics may be here to stay as we see less rental stock. 

  • Many tenants who managed to negotiate great deals over the last 18 months were able to sign contracts for longer than 12 months to lock in their low rates, so you are not seeing those come onto the market. 
  • In addition, as I mentioned, many landlords in the capital have decided to sell up. Some 13% of London properties currently listed for sale have been rented out in the past three years, up from only 3% two years ago, according to Zoopla.
  • Some investors sold in order to take advantage of the frenetic sales market in the first half of the year caused by the stamp duty holiday, while others have gotten fed up with tax and regulatory changes which have been punitive to individual landlords. 
  • Adding to the problem is the fact that fewer landlords are buying in London than they did before as recent tax changes came into effect which included a 3% stamp duty surcharge on additional home purchases started in April 2016 and the phasing out of mortgage interest tax relief that began the following year.

As you can see from this graph below, there has been dramatic decline of properties bought by investors. Data shows that only 8% of London properties sold in the third quarter of the year were bought by an investor, down from 24% at the end of 2014.

The buy-to-let sector has professionalised, which makes it hard to crack into if you’re a new, small-scale landlord. Increasing numbers of investors are putting their properties into companies — there were 10,388 buy-to-let incorporations in London between January and August, more than double the figure seen over the same period in 2018, and build-to-rent property listings have tripled in the past 5 years.

All of which suggests that supply may continue to decline meaning that renters will be paying more going forward. 

If you have any questions about renting, or are looking to relocate to London and plan to rent in the City, please get in touch.

Also, if you’d like to receive my free guide “8 Common Mistakes to Avoid When Letting Your Property”, go here.

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