London Prime Rents are 28% Higher than their Pre-Pandemic Levels

Data consultancy LonRes reveals that prime London experienced a substantial annual rental growth of 8.0 percent in June, taking rents to nearly 28 percent above their 2017-2019 (pre-pandemic) average. This surge in rental prices indicates robust demand in the market, with a significant number of properties being leased without ever being listed, thus eluding capture in the data. Consequently, the data for June suggests a 30 percent annual decrease in lets agreed and a 0.9 percent decline in new instructions, with activity levels remaining around half of the pre-pandemic figures.

While overall rental growth has been high across all property types over the past two years, there are noteworthy distinctions. Studio flats have witnessed the most substantial growth, with a remarkable increase of 29.0 percent compared to rental values in January 2020. They are closely followed by houses and 3+ bed flats. On the other hand, one and two-bed flats, which traditionally have been the most popular rental properties, have experienced slower rises of approximately 20 percent.

According to LonRes, these findings could be attributed to two distinct trends. The first trend, favoring small properties, may be a consequence of post-pandemic shifts in working patterns. As individuals who relocated outside of London return to the office, they now seek smaller pied-à-terre accommodations. The second trend is driven by affordability, as tenants opt to share larger properties rather than choosing one or two-bedroom flats.

Nick Gregori, head of research at LonRes, comments on the state of the prime London lettings market in June, noting that rents continue to grow while new supply remains scarce. He finds it particularly intriguing that rental growth has been strongest for smaller properties, indicating the evolving working patterns and the increasing impact of affordability concerns.

In summary, the prime London rental market is experiencing robust annual growth, with rental prices surpassing pre-pandemic averages. The demand for rentals is so intense that many properties are being leased without even being listed. The unique dynamics of the market are reflected in the varying rental growth rates across different property types, with smaller properties leading the way. These trends highlight the changing landscape of working patterns and the growing significance of affordability factors. The prime London rental market continues to present opportunities and challenges for tenants and landlords alike.