A frustrating period for renters in London’s prime rental market is set to continue this summer, according to a newly released market analysis by Knight Frank.
As supply and demand rebalance in the sales market, the amount of property available for rent remains low compared to demand in London and Home Counties. The number of new prospective tenants registered in May was the fifth highest in a decade and underscores how strong demand remains for offices and universities to reopen.
Meanwhile, on the supply side, new car registrations in prime Central London and prime Outer London are still around a third below their long-term average.
However, there are early signs that supply may be slowly picking up. In May, the number of market appraisals (a leading indicator of demand) was the 10th highest in a decade.
One reason for the increase is that more and more owners are renting out their property after not being able to achieve their desired price in the sales market. Price growth in Prime Outer London appears to be slowing as the race for space settles and in Prime Central London it is only picking up steadily, with overseas buyer numbers yet to return to pre-Covid levels.
Another cause is higher churn as more workers change jobs or leave the UK altogether. According to a recent global survey by accountant PWC, one in five workers is likely to quit their job in the next 12 months. The so-called “big layoff” will occur as more and more workers seek better pay and a greater sense of accomplishment.
Meanwhile, more landlords are being lured back into the market by rising rents, a trend that would also support demand, as explored here.
Average rental values in PCL increased 29.1% in the year to May. The rise was smaller than in April, suggesting that recent steep increases have peaked. Rental values fell sharply in early 2021 as residency restrictions led to a flood of short-let properties into the long-let market, pushing rents lower. The annual change was 23.1% in POL, which was also down from April.
Jennifer King-Neary, Aldgate Letting Manager at Knight Frank, says: “It’s not a significant amount yet, but we’re seeing more inventory coming over from the sell market. The other thing we’ve been very busy with is tenant evictions. More people are changing jobs or commuting, and others are moving abroad.”