As supply for London rental properties continues to far outweigh demand, the Office of National Statistics has released a report saying that private rents have increased by 3.2% in the twelve months leading up to July, 2022. This is the largest annual growth rate since they began collecting this type of data back in 2016.
As the cost of living crisis grows, there have been calls for a rent freeze, only landlords are feeling the pressure too, making them reluctant to reduce costs overall. This is due to the Bank of England continuing to raise base rates, which in turn means increased mortgage interest rates, resulting in landlords claiming they’ve no choice but to protect themselves.
Meanwhile, stories have begun to circulate about London tenants facing extreme rises in their monthly rent, in some cases over 30% per month. For many this is, of course, unaffordable, putting people in an extremely difficult situation, either having to renegotiate or find somewhere else to live. Given the current state of the market, this latter option is, understandably, a potentially frightening prospect, with as many as fifty applicants vying to secure each available property.
At the same time, changes in legislation are causing some landlords to leave the market altogether. Amongst a variety of concerns, the potential removal of the right to give tenants two-months notice to vacate the property at the end of the tenancy has proved highly contentious. It’s also true that many renters who secured a good rental price during the pandemic have been able to maintain that reduced amount for much longer than the standard twelve months. What’s clear, however, is that if landlords remove their stock from the market, the discrepancy between supply and demand will only intensify.
As ongoing increases in inflation and the cost of living show no signs of abating any time soon, the capacity for future growth looks increasingly diminished going into 2023. Low stock and high demand are set to continue, meaning that, ultimately, the current spike in London rents is, for now at least, here to stay, with no real certainty as to when things might change.
Sources: Bloomberg UK, The Business Times, FT Advisor and MyLondon.