"Demand is strong, we have had another record year, and it is positive for the landlords who are staying in the market as there will be upward pressure on rental yields. However, from a tenant’s perspective, the unintended consequence of rising rents would not be welcome"
- Gary Hall - Knight Frank
The pushback against the Renter’s Rights Bill is growing. Last week saw speculation that the Conservative Party could delay the Bill or block it altogether with a legal challenge.
The new rules, which are due to come into effect later this year, will make it harder to evict tenants and increase risks around the collection of rent. Opponents say it will encourage landlords to sell up, which will push rents higher.
The proposals, along with the prospect of tougher green regulations and rising mortgage costs, already appear to be having an impact on supply.
The number of new lettings properties coming to the market in London and the Home Counties in the first quarter of the year was 10% lower than the same period last year, Knight Frank data shows. The same figure was down by 15% on 2023.
“More landlords are leaving the sector, and we can feel on the ground that their numbers are reducing,” said Gary Hall, head of lettings at Knight Frank.
“Demand is strong, we have had another record year, and it is positive for the landlords who are staying in the market as there will be upward pressure on rental yields. However, from a tenant’s perspective, the unintended consequence of rising rents would not be welcome.”
The ratio of new tenants to new lettings properties on the market was 5 in the first quarter of this year. That compares to 4.6 in the previous two years, showing how demand is growing relative to supply.
The Renter’s Rights Bill is currently at the committee stage in the House of Lords and subject to amendment if the House of Commons agrees, which may involve some Parliamentary ping pong between the two houses.
Tighter supply already appears to be having an impact on rents in prime London postcodes.
Average rents in prime central London rose by 0.6% in the three months to March, which was the largest quarterly increase since November 2023. It took the annual change to 0.8%, the biggest increase since October last year.
Meanwhile, average rents rose 0.1% over the last three months in prime outer London, which was the highest increase since November last year. The annual figure was 1.2%, which was up from 1% in January and February this year.
We recently revised up our rental forecasts to reflect the slightly more inflationary outlook for the prime lettings market in London.
Whatever the shape of the Renters Rights Bill when it comes into effect, subject to legal challenges and delaying tactics, tenants will hope they do not bear the financial brunt of the new legislation.
