Demand has far outstripped supply in London’s rental market over the last two years. To put that in stark numbers, average rents in prime central London grew by 50% in the 24 months to April 2023. In prime outer London, the equivalent increase was 41%.
Meanwhile, there were 42% fewer new lettings listings in the two years to April than the previous 24 months across both markets, Rightmove data shows.
Simply put, strong demand as the economy re-opened was not matched by supply. A number of landlords took advantage of a robust sales market during the pandemic and left a sector that had become more financially punitive for them in recent years.
They have been subject to a series of tax and legislative changes as politicians from all parties have attempted to deal with the politically sensitive issue of UK housing and the affordability pressures faced by first-time buyers.
The most recent example is a plan to make owners obtain planning permission to turn their properties into short-term lets. As landlords leave the sector, the result is that the affordability pressures faced by buyers have spread to tenants.
As the general election moves closer, housing is likely to remain a key area of concern for voters. Rent controls is one policy that has been floated as a way of easing the pressure on tenants.
However, the unintended negative consequences are likely to multiply if the example of other countries is any guide and more landlords leave the sector. It is perhaps why the Labour Party appeared to back away from the idea of rent controls last month.
In the meantime, annual rental value growth remains stubbornly high. Average rents rose by 16.4% in PCL in the year to April while the figure was 13.9% in POL.
The supply/demand imbalance is improving but only slowly, with annual growth down from a high of more than 20% in both markets a year ago.
New lettings listings in PCL and POL were 2.3% higher in the six months to April compared to the equivalent period a year ago, Rightmove data shows. Meanwhile, the number of new prospective tenants registering was 9% lower over the same period.
Things are at least moving in the right direction.
