London’s rental market remains strong, with multiple applicants often ‘competing’ for the same property and apartments letting immediately in most cases, as long as they are accurately priced in line with current market conditions. For months now we’ve had lists of fully referenced applicants prepared to wait two or even three months until a rental property becomes vacant. And as international travel continues to open up and we see greater numbers of professionals moving back to the UK for the first time in a couple of years, the resulting shortage of rental properties in London continues.
As always, we need more stock to meet this unprecedented demand, so if you have a rental property, either a new apartment or one that is becoming vacant soon, please get in touch with your nearest Benham & Reeves branch.
We are starting to see subtle changes in the market as we return to normal, particularly as working patterns are shifting towards a mix of working from home and a return to the office. A noticeable trend is this move by larger companies to encourage their staff to return to the office – at least part of the time. This means that applicants may once again be looking to rent a home closer to their place of work, perhaps after living further out of London for the last couple of years.
Our 19 London lettings branches are also now seeing increasing numbers of enquiries from overseas professionals who are returning to London or maybe changing jobs. They are from a mix of countries including Europe and the US and most have good budgets.
So this return to the office is influencing the type of property that many applicants would like to rent. There is a gradual shift in tenants’ priorities as many are now looking to find a home within an easy commute of their office in central London, the City or Canary Wharf. Properties close to a Tube or overground station are back in demand but additional space (often a second bedroom) to be used as office space when working from home is also important.
And the cost of renting a larger property, combined with the cost of the commute, inevitably means bigger bills and affordability is becoming a concern for many applicants.
Rents dropped across London throughout the pandemic, but they have been climbing for several months now, mainly due to the chronic shortage of rental properties coupled with increasing demand from domestic and overseas professionals and students returning to London. Rents are generally back to pre-pandemic levels and in some cases 5% -6% higher and with rising interest rates, this increase will no doubt be welcomed by our landlords.
Tenants renewing their current leases are paying the new market rentals (many will have probably been paying below market rate previously). But landlords should be aware that there is a limit to what tenants can afford to spend on rent. Inflation in the UK is at a thirty year high, increasing the cost of renting substantially so there is an affordability factor to consider and a limit to what tenants might be able to pay. This is when thorough tenant referencing becomes essential and landlords should be careful to check their agent has a robust system in place like we do.
We recently carried out research examining the cost of renting in relation to household income in different areas of the UK and it reveals some interesting findings. You may be surprised to learn that London, while undoubtedly expensive, is not the most expensive place to live in the UK in terms of the overall cost of renting as a percentage of monthly income.
Rental demand remains strong throughout the areas covered by our City and East London lettings branches and a lack of housing stock is a key challenge for us. We’re seeing a lot of enquiries from tech professionals and from relocation agents searching for properties on behalf of overseas clients, including Europe and the US and, increasingly, India. Accurately priced rental properties are letting within five to seven days. Budgets are good, and applicants are typically looking for properties in the £1500 – £4000 per month price bracket.
Tenancy renewal rates remain high, with around 60% – 65% of current tenants renewing, usually at the current market rent, whereas previously they had often been paying below market rent. Generally, tenants are only moving on if they are relocating to a new area or because of a change in circumstances.
We have a couple of exciting new phases of developments completing soon – Merino Wharf (from the Berkeley Group) at London Dock, which starts completing at the end of March, and One Bishopsgate Plaza, a landmark tower in the heart of the City. We are already receiving enquiries for both buildings and have new instructions lined up in both.
In West London, we’re seeing a significant trend towards professionals returning to the office and therefore searching for homes closer to Tube or overground stations. Many still require space to work from home too, and this is presenting a challenge – more space and good transport links – within their budget. We have little stock available now and most applicants are signing tenancies for properties that will not be available until later in March or April.
At The Green Quarter in Southall, landlords are completing on a new property one day and having it furnished the next – by the following day we will already found a professional tenant for them.
Landlords are achieving good rents, sometimes over asking rental if there are multiple enquiries. Tenancy renewal rates are high as most existing tenants are not moving unless they have a good reason. We’re seeing a lot of enquiries from relocation agents, mainly for clients from Europe and the Middle East and Asia.
We always need more stock and are keenly waiting for the completion of new apartments at Grand Union (Berkeley Group) a new canalside development in Alperton, and Western Circus (Barratt London), a new residential quarter in Acton.
Our Fulham Reach branch in Hammersmith is seeing more movement in the market and a greater turnaround of properties. Some tenants are looking for a change and deciding to move, although still staying local. Rents are back to pre-pandemic levels and apartments are letting immediately. We have very little stock available so are actively looking for new instructions. The last month has seen a rise in enquiries from relocation agents, mainly for European clients.
Stock levels are low across Nine Elms and Vauxhall but we will be receiving new instructions soon which we expect to be in high demand. Phase 3 at Battersea Power Station is due to start completing at the end of March while Thames City, a landmark development overlooking the Thames, will be completing from May. A new block at the DAMAC Tower is also completing from the end of March. Rents generally are at pre-pandemic levels, with apartments letting quickly. Most applicants are international students. Tenancy renewal rates remain high but existing tenancies are being agreed with increases of 15% – 30% and are at current market rents.
In prime central London, the rental market is seeing good demand. Rents are increasing and applicants are making sensible offers for properties. Our Knightsbridge branch is seeing a shortage of one bed properties at the more affordable end of the market (around £450 per week). The Nova building in Victoria, SW1, is in exceptionally high demand and is at the top of many wish lists. Kings Gate Walk, Grosvenor Waterside and 55 Victoria Street are popular too.
Our Beaufort Park branch in Colindale is extremely busy – in fact we’ve never had such low stock levels. All new instructions are let immediately, often before they even appear on our website. This is mainly because we have an estate agents branch on-site at Beaufort Park and tenants and buyers always come to us first. We’ve been operating in the area for over 15 years now so people know us, trust us and some landlords have been with us since the scheme launched back in 2006.
We do have a few new instructions coming onto the market but not enough to meet demand so applicants have to move quickly to secure a property. Most are renting properties that won’t be available for another two or so months.
In Hampstead, there is also a shortage of properties, with most properties letting immediately. At times we have had three offers on a single property and applicants are prepared to pay a little over the asking rent to secure a property. Prospective tenants really do love the area and some of our existing tenants have lived in the same property for over 10 years so we have very good renewal rates which many of our owner clients, seem to prefer rather than having a new tenant each year. All types of Hampstead properties are popular at the moment, particularly 1 and 2 bedroom flats with 2 bathrooms for sharers.
The London rental market is fast-moving, now more than ever. Only a local agent can give you an accurate appraisal of the rent your property could achieve in the current market so please contact your local Benham & Reeves branch to arrange an appointment.
View all posts by Anita Mehra