The London rental market was one of the hardest hit over the course of the pandemic for a number of reasons and it has taken a while to re-establish itself as a favoured ground for landlords, property investors and developers.
However, lengthening disparity between available stock levels and tenant demand has seen conditions improve for landlords to return to the capital’s prime lettings market. This is according to the latest market analysis and insight from London Central Portfolio which reported that highly competitive rental market conditions are leading to tenants extending their current tenancies and postponing their next move.
As tenants extend their existing tenancies, landlords have been able to negotiate renewal increases of nearly 5% in Q3 2022. With a shortage of stock and increased competition, tenants have chosen to renew rather than relocate. This in turn has exacerbated the already constrained supply for new applicants.
Shortage of rental stock and significant levels of demand continued to reduce vacant periods at unprecedented levels. The average number of days a property stood vacant in Q3 2022 was just 9.7 days compared with a long-term average of 31.8 days. This has been welcome news for landlords following the extensive voids during the pandemic.
Agreed rents on re-lets rose by nearly 18% in Q3 2022. Shortage of stock and a surge in demand as overseas tenants return to London has led to bidding wars resulting in properties renting over the asking price. The significant rent increases are in contrast to the softer pricing achieved during the pandemic.
Students represented the most new move-ins at 44% in Q3 2022 as they returned to London for the start of the new academic year. Tenants from the finance sector continue to represent a large proportion of new move-ins at 32%. This continues to highlight London’s position as a global financial hub.
It’s always interesting to delve a little deeper into certain rental markets as, whilst London can be an outlier in many ways, we can also learn plenty about how these trends may be interpreted across the wider BTL marketplace, although regional variations still need to be accounted for. In light of recent events, it will be fascinating to see how these trends stack up in Q4. So, watch this space.