Well, this has been a year like no other! Demand for rental properties in London has been soaring since late summer and is now reaching record levels. Much of this is due to the return of international travel, with professionals resuming their London lives and record numbers of international students (around 450,000) resuming or starting their university education in London. But, of course, 2021 didn’t start out like this.
The London rental market was badly hit by more lockdown restrictions at the beginning of the year, with demand remaining slow. We saw a surplus of rental stock, with rents falling as a result. And this sluggish market came on top of the rollercoaster that was 2020 when demand dropped off a cliff as professionals moved out of London. Subsequent lockdowns and the need to work from home saw both professionals and students stay away from the Capital.
As a result, many landlords were forced to accept lower rents as their key objective was to keep their property tenanted in a slow market.
So the first two quarters of 2021 saw difficult trading conditions for us and other London lettings agents – it was an industry wide issue. Most existing tenants were renewing, albeit usually at the same rent. Thankfully though, most of our landlords did not suffer defaults on rents and were able to weather the worst of the Covid pandemic challenges.
But with London life starting to return to normal from the summer, we’re confident that the rollercoaster of the last 20 months is now firmly behind us and we expect positive growth in 2022.
London life returning to normal
The easing of lockdown restrictions has been a gamechanger. And while we were still cautiously optimistic at the start of 2021, the tide really has turned now and from the third quarter of 2021 we have been seeing a complete turnaround. The vaccine rollout has been even more successful than we could have imagined and with travel restrictions easing from June/July, there has been a clear desire to return to normal.
Where previously, many had worked from home and kept away from central London, the appeal of London’s vibrant theatres, restaurants, bars and other attractions – has been irresistible. And for many professionals, this means returning to live in areas of central London where they can live closer to their place of work to achieve that vital work/life balance. Many of us want to return to the office, get out more and not work from home all the time. Indeed recent ONS Gov statistics state that mobility using public transport has been increasing and between the 3rd and 14 November 2021, around two-thirds (67%) of working adults in Great Britain reported travelling to work at some point in the past seven days. 3 in 10 working adults (30%) reported working from home at some point in the past seven days. This suggests that workers are getting back in the zone and it is certainly our experience that while there is willingness to commute, a lot of tenants are preferring a short walk to the office rather than a longer journey.
And that leads us on to our next challenge! The acute and growing shortage of rental properties.
Rental demand outstripping supply in London
In fact, we’ve never known a property famine like this. At times we have had 50 applicants scrambling to rent the same property. Some of our lettings branches across London have let all their stock and had no properties available at all. For example, at Beaufort Park in Colindale we have had queues of renters enquiring as to when an apartment would become available. And most of our branches have lists of fully referenced tenants waiting for apartments. Often, applicants are prepared to wait for two or three months if this is what is required. In the meantime, they will rent an Airbnb or other type of short let accommodation.
Much of this high demand is caused by applicants returning to their pre-pandemic lifestyles. But it is also a knock-on effect of a shortage of new stock coming to the market – there have been delays in the completion of new developments due to lockdowns and shortages of building materials so this really is a ‘perfect storm’ of events beyond our control.
Lack of stock pushes rents upwards
Generally, the lack of supply is now pushing up rents, which in most cases are now on a par with pre-pandemic levels. Rents started to stabilise in mid-summer.
In fact, our recent research shows that London rents are currently 9.4% higher than in 2020 and 5.7% higher than in 2019, before the pandemic. Rents are expected to increase 5.5% in 2022 as pent-up demand fuels soaring demand and stock levels remain insufficient to meet this demand. Read our research here. Generally, the shortage of properties means that most applicants are immediately offering the full asking rental.
But of course affordability will become a key issue. We expect rents to reach a peak towards the middle of next year but if prices become unaffordable applicants will start to look further out where they can find better value.
Finding a rental property in this competitive market
This strong competition for rental homes means that landlords are finding that we can find a tenant for their property with virtually no void period at all. We have waiting lists of fully referenced tenants at all our eighteen London lettings branches.
But this is causing serious problems for tenants who have frequently been unable to find a rental property at all. One option that many have resorted to is to opt for short-let accommodation (Airbnb or similar) while they wait for a long-term rental property to become available.
Applicants, particularly students, looking for homes in areas across London, from Hyde Park in central London to Wapping and Surrey Quays in East London, are often now considering this option in desperation while they wait for more permanent homes to become available. We really feel for these applicants and understand the stress they are under so we are doing our best to obtain new instructions to satisfy this unprecedented demand.
Moving to London’s peripheries to find more space
The current shortages of rental stock mean that many tenants now are extending their property search to London’s peripheries, perhaps further out than they had originally planned. Thankfully a number of new, high quality residential developments have started to complete this year and the demand for these is extremely high, with apartments letting quickly. A longer commute is a compromise but one that they are usually happy with if they can find a high quality home within their budget. Most don’t yet commute to the office every day anyway.
On the fringes of West London, developments such as The Green Quarter in Southall and Eastman Village in Harrow have seen extremely high demand, with apartments letting very quickly throughout the year. Apartments at The Horlicks Quarter in Slough are also being snapped up by renters looking to move out of London in a search for more space and great value for money. Wembley Park is another area that has recently been regenerated, with exceptional apartments, great amenities nearby, world-famous entertainment venues and just 12 minutes from central London.
Of course, well established developments in West London such as Dickens Yard in Ealing and Kew Bridge in Brentford, continue to attract interest from professional renters too and both these and Fulham Reach in Hammersmith and nearby Imperial Wharf continue to have waiting lists.
London’s ‘red hot’ residential developments
It’s impossible to mention all the developments that are generating such huge interest amongst applicants but some of our top performers include Beaufort Park in Colindale, North London, where we have queues of applicants waiting to enquire about properties. It’s not unusual to have more than 10 applicants per property here.
In the City and East London, a number of new developments have been completing this year, from Cashmere Wharf in London Dock to Landmark Pinnacle, One Park Drive and South Quay Plaza. Suitable for a range of budgets, we have had constant demand for these apartments as they complete. We’ve also seen a number of apartments at Lincoln Square in WC2 snapped up by tenants ranging from City lawyers to international students.
In central/West London, high end developments such as White City Living and Fitzroy Place have seen exceptional demand this year, with apartments often letting within a couple of days. Other premium buildings such as Rathbone Square, 101 Cleveland Street and The Lancaster have seen similarly high demand. And in Kensington, we let two new apartments at Lancer Square – on the first viewing. They let so quickly that there wasn’t even time to get the properties listed on our website!
Most of our branches have been out of stock at some point this year
These are just a few examples of some of our most sought-after developments but what is astounding is that across London, from Nine Elms in Vauxhall to 250 City Road in Shoreditch and from Beaufort Park in Colindale to Surrey Quays in East London, most of our lettings branches have had times this year when they had let ALL their stock and had absolutely no rental properties available. This is a first for us in our sixty years of business.
We need more stock! Get our 0% fees offer for new property instructions
We have never experienced such a dramatic shortage of rental properties in London – so to increase our stock levels are we now offering zero percent letting and management fees for three months – for a limited period – for brand new rental instructions (ie those properties not already let and managed by us).
If either you or your friends would like to take up this offer, please contact your local Benham and Reeves branch as soon as possible – the offer ends on December 31st 2021. We’ll do a free valuation and you are not under any obligation to instruct us but if you do, I’m confident we will let your property. Get in touch with your nearest Benham and Reeves branch to sign up!
View all posts by Anita Mehra