Supply drought continues to plague the prime London rental market with no end in sight, according to Knight Frank, one of the leading high-end lettings agencies in the capital. The agency reports that over the past two years, demand has far outstripped supply, resulting in staggering increases in average rents. In prime central London, average rents grew by 50% in the 24 months leading up to April 2023, while prime outer London saw an equivalent increase of 41%. Meanwhile, new lettings listings dropped by 42% in the same period, as reported by Rightmove data.
Tom Bill, the head of residential research at Knight Frank, explained that some landlords have been leaving the sector due to various tax and legislative changes. Furthermore, the recent proposal to make property owners obtain planning permission to turn their properties into short-term lets has led to more landlords leaving the market. As a result, the affordability pressures faced by first-time buyers have spread to tenants.
As the General Election draws nearer, housing is expected to remain a significant concern for voters. Although rent controls have been suggested as a way to ease the pressure on tenants, Bill warns that the unintended negative consequences are likely to multiply if the example of other countries is any guide, leading to more landlords leaving the market. This is perhaps why the Labour Party recently appeared to back away from the idea of rent controls.
Despite the challenging conditions, annual rental value growth remains stubbornly high, with average rents rising by 16.4% in prime central London and 13.9% in prime outer London in the year to April. While new lettings listings in PCL and POL were 2.3% higher in the six months to April compared to the same period a year ago, the number of new prospective tenants registering was 9.0% lower over the same period, according to Rightmove data.