London rent increases starting to slow

THE pace of spiralling rental costs in London is finally beginning to soften, offering tenants a glimmer of hope that their next monthly hike will be less severe.

The rate of rent increases moderated as the first half of the year progressed, according to one of the capital’s biggest brokers, Foxtons Group. The company expects those hikes to ease further this year, according to a statement on Thursday (Jul 27), as landlords pass fewer costs onto tenants who are bearing the brunt of a cocktail of costs pressures and tougher regulation on buy-to-let investors.

“We’re probably going to see single-digit growth across the second half, whereas we’ve seen double-digit growth in the first-half of the year,” Foxtons chief executive officer Guy Gittins said in an interview.

Still, Foxtons warned that the large gap between the supply and demand of rental units will continue to drive up costs, creating “an increasingly serious issue” that will impact renters negatively.

Rents continued to rise overall in the first half of the year, reflecting the crunch in supply in the capital’s competitive lettings market. That contributed to Foxtons’ lettings revenue surging by over a quarter in the period compared with a year earlier, outperforming its sales returns.

The average monthly rent in Greater London surged 13per cent year-on-year in June to £2,271 (S$3,902) according to Hamptons International, and tenants living in inner London are now dishing out over £3,000 a month. That’s forcing many prospective homeowners to put their buying plans on hold, especially as mortgage rates surge toward 15-year highs.

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“Higher mortgage costs, the inflation-driven cost-of-living issue, and the withdrawal of Help-to-Buy on new homes all combined to cause a drag on the sales market,” Foxtons said in the statement. BLOOMBERG