London rental market hits record rents amid property shortage

At the moment, more people want to live in London than there is available property and we are slap bang in the middle of a red-hot rental market where demand for rental properties is the highest we have EVER seen and this is leading to rents increasing across the board.

There are many driving factors for this extraordinary moment in time:

• Increased connectivity from the roll-out of Crossrail’s Elizabeth Line allowing more people to travel into and across London, faster than ever before;
• 92% of our tenants are renewing their tenancies with more affordable rent increases;
• Post-covid travel has opened up so corporate executives are returning to London to take up jobs;
• Overseas students have returned in droves , in fact, there are now 450,000 students studying in the UK and London has the highest number of students in the world.

In some cases, our rental properties are letting within hours of going onto our website, sometimes within minutes.  Across our nineteen London lettings branches we have waiting lists of fully referenced tenants requiring a property to rent now, and it’s not unusual for us to receive 25 enquiries for a property within hours of it reaching our website. As a result, voids are negligible and rents are increasing, while stock levels remain very limited.

Overseas investors confidence returning

As I write this, I have just spent time in Dubai and Kuala Lumpur with my fellow directors, where we conducted numerous one-to-one meetings with investor clients and prospective buyers. Education has always been a key reason for them purchasing residential property, particularly in prime London locations. The current appetite to buy remains high, while the pound is weak, despite the financial market volatility that followed UK Prime Minister Liz Truss’s mini-budget. Experienced property investors recognise that unprecedented rental demand makes this an excellent time to expand their London property portfolios and the current weak sterling and pressure on supply, presents a unique opportunity to buy.

London-wide, the rental market is red hot

Taking a look at the areas our nineteen branches cover, we are seeing a great deal of interest in North-West London namely Colindale NW9 which to give some context, is just 30 mins by Tube to Bank station in the heart of the City.

Last week, our Head of China Desk, Penny Cheung, held an event in Colindale called ‘Buy to Let/Buy to Live’, especially for Chinese families and individuals. The event was extremely well attended by locals and those from Chinese communities in other parts of London where we have strong networks. Many Hongkongers also attended, these are here under the UK Government’s BNO visa programme hoping to settle here long term.

The event which was a resounding success, included a dinner and talk narrated in Cantonese and Mandarin and covered many subjects around UK Property including buying procedures, stamp duty, taxes, mortgages arrangements, buy-to-let and some legal aspects of letting a property.

In other parts of North-West London, Hampstead continues to be a top rental hotspot, particularly for younger executives with budgets of £500-650 per week but of course, we don’t have enough stock to meet demand.  Some disappointed tenants have had to consider neighbouring village West Hampstead where there has been a little more movement and lower rentals.

The City and East London with very low stocks

Staff at our Canary Wharf, Wapping and City branches are still seeing high demand for one and two bedroom apartments.  Immediate move-in’s have now become the norm as there always seems to be a referenced tenant ready to move with bags packed.  We currently have waiting lists of up to 10 weeks before a property becomes available because around 86% of our existing tenants are renewing.  In September, I reported that a high proportion of applicants were international students, mainly from China, and many paid a year’s rent in advance to secure a property which is clearly beneficial for our landlords. Local applicants have found this hard to compete with but this is a seasonal situation and things should ease with normal activity returning now the Autumn semester has started.

Undeniably, the Elizabeth Line has had a highly positive effect on rental requests and our Woolwich branch, which is situated by the River and next to the station, has been doing brisk rentals at Royal Arsenal Riverside. Local families have also been looking for houses to rent, but here the market has become somewhat stuck as more homeowners continue to sit on the fence while they decide whether to sell now or not.

Central London – Zones 1 and 2

Over in Tube fare Zone 2’s Nine Elms area, Battersea Power Station has re-opened after its £9bn redevelopment. The Grade II-listed building which boasts thousands of stylish homes and opened to the public on 14 October.  Visitors can pay to travel 357ft (109m) up the north-west chimney in a glass lift, emerging on to a 360-degree viewing platform. They can shop or dine in one of the restored turbine halls, ranged over three levels. The halls are lined with more than 100 well-known retail outlets, cafes and places to eat.

The power station’s restored Boiler House is to become Apple’s new London headquarters, the workplace for more than 1,000 staff.  Our Nine Elms branch staff have been finding the right homes to match executives all hoping to take part in a moment in history by renting a property and as an agent operating locally here, it has been a memorable experience to house so many happy tenants here.  Rentals as you would imagine, are higher than the wider area, but for those with the right budget, there is more choice.

In prime zone 1, our Kensington branch in Thackeray Street continues to look after many local tenants who love the area and so renewal rates are 96% at the moment.  Demand continues for all types of property, from new to old, large and small. Supply is terribly low and some of our tenants are currently in hotels, waiting for something to become available.

Relocation companies continue to drive demand in Mayfair, Hyde Park, Chelsea and Fulham on behalf of corporate executives
who come with excellent budgets. Our Japan Desk reports a 29% increase in enquiries in the last 4 weeks from individuals and couples who are looking for 2-4 year leases.  Japanese tenants are in hot demand as landlords have come to see how respectful they are towards caring for their surroundings. They are here on secondment from notable employers who usually pay for the rental so they make excellent tenants.

Higher mortgage rates will often increase demand in the rental sector. Deteriorating affordability in the sales market will push some buyers to rent instead. With fewer buyers, some sellers may become accidental landlords as they wait and see whether inflation will stabilise or increase further.