Home Property Demand for rental properties in London unseasonably high, but price rises are slowing

Demand for rental properties in London unseasonably high, but price rises are slowing

by LLP Staff Reporter
3rd Jan 23 12:56 pm

In October, estate agency Chestertons saw the first signs that some of the heat was coming out of the London rental market and the agency’s November data confirms this, the number of landlords that reduced the amount of rent they were asking for in November was double that of the previous November and 50% higher than October.

10% more new rental properties came onto the market in November and the overall number of available rentals was 50% higher compared to November 2021.

With more properties coming onto the market, Chestertons also saw more tenants coming to the market to find a new home.

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Enquiries from new tenants were up 10% compared to November 2021, whilst the number of completed viewing appointments increased 12% on November 2021, and 8% more tenants made offers on rental properties, again compared to last November.

Above average tenancy extension rates have been a feature of the market since Covid and this has compounded the structural shortage of private rental housing in London by taking more rental homes out of the market for a longer period.

Chestertons saw the numbers of tenants renewing their existing leases in November increase by 30% alone, on top of a 18% jump seen in October. High extension rates have been caused by the highly competitive market conditions in 2022 as well as reduced choice and increasing rents.

However as these ‘long Covid tenancies’ come around for renewal in 2023 and rental price growth cools, Chestertons expects more of these properties to be released back into the market which will help boost supply further this year.

Richard Davies, COO of Chestertons, said, “Covid had a major impact on the natural cycle and operation of London’s rental market with lockdowns restricting tenants’ movements and their ability to move, artificially cutting supply and extending the average rental property’s time on the market which impacted on pricing.

“The aftershocks of this unusual period are finally coming to an end and we believe that London’s rental market is now showing signs of stabilising, with more rental properties coming onto the market and an increasing number of landlords being realistic on the rent they are prepared to accept to minimise any void period”

2023 forecast

Going into the New Year, Chestertons advises that the disruption caused by Covid to the supply of rental properties is still ongoing and the number of available rental properties in London is still falling, albeit at an increasingly slower rate going into 2023. However, it believes that more properties are now becoming available and that affordability pressures are placing an effective cap on tenants’ budgets.  This is helping to rebalance London’s rental market and reduce the pace of rental price growth.  It forecasts rents to continue to grow by up to 5% over 2023, before plateauing in 2024.

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