The capital was impacted by large swathes of office and workplace closures under lockdown restrictions, with people being forced to work from home and a virtual end to the commuter lifestyle. When I say commuter, it’s easy to just think of people travelling in from surrounding counties but with Greater London covering such a huge area, it has its own unique commuter community from Zone 1 through to Zone 6.
Prolonged levels of remote working led to many tenants looking beyond the London boundaries as the need to travel into work lessened and the appeal of cheaper rents and additional space – inside and outside – grew. Many landlords also followed this migration path and for those in a position to add to their portfolios, attention turned to properties further afield.
However, when looking at the current market, green shoots are appearing in the capital – at least if the latest market analysis from specialist mortgage lender OSB Group is anything to go by. This suggested that, although landlords operating in London generally remain less optimistic than in other parts of the country, there has been a definite bounce back in confidence for the first time since the start of the pandemic as renters return to the city.
Tenant demand in London has tracked below the UK average in recent years, but central London has seen a sharp recovery, with the number of landlords reporting increasing demand growing from one in ten in the second quarter of 2021 to more than half by the final quarter. This growing demand is also boosting rental returns. OSB noted that the third quarter of 2021 saw confidence in rental yields in both central and outer London increase to all-time highs in the series, which dates back to late 2016. Indeed, central London moved from the lowest-ranked region in the second quarter to exceed the national average in the third quarter, the first time this has happened in more than two years.
With lockdown restrictions now eased and, hopefully, becoming less likely to return, landlord confidence is starting to rebound across a number of confidence indicators as rental demand returns in the region. Newly released data from ARLA Propertymark also reveals that demand is outstripping supply in the capital with the average number of new prospective tenants reaching the highest levels on record for the month of December, at 67 per branch.
We all know about the power of supply and demand when it comes to the UK’s housing and rental markets. The interesting curveball to throw into the mix is attitudes from businesses and the UK workforce to remote working. Of course, this is impossible in some of the more customer-facing areas but this is an area that is likely to test the rental pull of cities against the potential of more space and cheaper rents beyond the city boundaries.
Lifestyle choice is also a consideration in terms of how appealing the bright lights of London will be for young professionals, especially after a period where social lives were virtually non-existent.
These are all considerations for landlords to take into account and I’m sure that 2022 will reflect more interesting trends from the rental market across the capital and other major cities across the UK.
