Taking the temperature of the Prime London lettings market.
With the general election now out of the way, our main hope and expectation is that, with the benefit of certainty over the political environment for the next 5 years, the lettings market can reap the advantages that come with stability. Much will depend on how the new government addresses the long-mooted renters reform legislation that was shelved by the previous incumbents, and until that happens, there is little point in speculation. As local estate agents, we hope that with the government’s stated focus on growth, they work to incentivize responsible property investment for landlords, injecting much-needed supply into the market.
As previously reported, the lettings market in Prime Central London has returned to the more traditional seasonal fluctuations that characterised activity pre-covid. The effect of this has been to normalize the rate of rental value growth which – in 2024 YTD - has been growing at an average annual rate of around 2.5%. Whilst in general terms this is positive news, and the outlook is for continued average rental value growth, activity “on the coal face” shows significantly shifting trends across the property value spectrum.
At the lower price points, sub £1,000 per week, an area where the white heat of tenant demand had been felt most strongly, there is increasing price sensitivity among renters which, allied to an increase in supply caused by a lower rate of renewals, is applying downward pressure on rental values. Within the mid-range of value £1,000 - £3,000 per week, which is traditionally a market dominated by the “corporate tenant” sector, demand has been weak which has increased the average time on market to around 80 days, an increase of 12% (source Lonres.com). Whereas demand within the prime sector, over £4,000 per week, has performed the best, with Maskells securing a number of new lets over £5,000 per week before the property has even come to the market.
As a estate agents london our advice to Landlords in the former camp are to be circumspect. It is easy to get carried away in the frenzy of activity experienced over the previous 2 years however, with average time on market approaching those levels last seen in 2017-2019, it is clear that there is a widening gap between Landlord and Tenant expectations on price.