In an economic climate where homeowners are thinking of ways to lessen the load of rising costs, renting out a property is now a serious option. This trend has the welcome effect of increasing rental stock and loosening up the market; no one wants a hothouse situation. However, this small stock gain follows a period of very little movement and we still have waiting lists of hopeful tenants accross London, therefore, we don’t expect supply levels to ease until later in the Spring.
The Office of National Statistics (ONS) house price report (released 15 Feb) indicates that at £543,000, the average house prices in London remain the most expensive in the UK. This affordability barrier is diverting more people into the rental sector. New lettings instructions in the Capital are 10% up on levels from this period last year. Average rents in Prime Central London and Prime Outer London are up 24% and 22% respectively on pre-pandemic levels. Fast rising rents combined with slow rising property values mean increased yields for landlords. Numbers of new lettings enquiries have jumped by 30%.
Some mortgage dependent landlords have exited the rental market but certainly not in any great number and seasoned investors, particularly those who are overseas, are less affected by the recent interest rate rises so we do not see any great exodus on the horizon. With 70% of our landlords based overseas, our international sales teams are busier than ever assisting clients who want to increase their property portfolios and make gains from the weak pound. We are of course, in a good position to introduce them to some very attractive investment opportunities.
Adjacent to Westfield London, Berkeley’s White City Living development is very popular with renters, and properties are just completing in one of the new blocks. Our branch on-site has been involved in the furnishing and letting of quite a few apartments here. We can see just how quickly they are being snapped up – literally within hours. Foreign students residing at the Imperial College campus and techpreneurs and media professionals are all discovering the lifestyle on offer here and the convenient location.
Damac Tower and One Thames City are two Nine Elms developments whose riverside location is attracting brisk rentals too. There is pent up demand from last year with a long waiting list and rents are 10% up on Q1 2022.
Hampstead and Highgate to the north of London, are high on the list of many who covet the leafy hilltop locations and stunning rooftop views. New-build developments are thin on the ground here, but with many owners needing to fund extensive modernisation projects, there are some “accidental landlords” ready to rent out their properties. Further afield, rents are very strong in Mill Hill, NW7. New-builds like Barratt’s Millbrook Park have a Northern Line Tube station and excellent schools, right on their doorstep so rents are reflecting the location benefits.
In Tube zone 1, realistic rents are the name of the game in Kensington and Knightsbridge. This is the only way that landlords can get the market moving again, especially as new builds on the fringes of the neighbourhood start to look like a more competitive option. Very low supply has been a major issue for all letting agents, including us, but tenants are savvy too, they know the quality of accommodation they can get for their budget and local landlords have to be aligned with these expectations if they want to attract a good tenant.
Our Japan Desk has had a phenomenal start to the year with 33% more tenancies compared with Q1 2022. This is even before the Japanese corporate transfer window starts again in March and April, so we are expecting even more success. The comparatively inflexible nature of corporate allowances means that some tenants have been caught out by the recent rent increases at renewal stage and have had to find alternative accommodation that fits within their budget. Fortunately we have 20 branches across London and navigating such changeable conditions has always been our strength.
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