London rents top £2,500 for first time as supply of homes drops

RENTS demanded by landlords in London have topped £2,500 (S$4,169) a month for the first time ever but increased at the slowest pace in two years, providing tenants a glimmer of a calming market.

Online property site Rightmove said asking rents in the capital rose 0.9 per cent to a fresh record in the first quarter of 2023 compared to the previous three months. That marked a sharp slowdown from quarterly growth of 5.8 per cent at the end of 2022. Asking rents were up 14 per cent year-on-year and are rising faster in outer London.

Tenants in the capital are in the grip of a housing crisis with 10 prospective tenants for every available property across the UK, according to Propertymark, the trade body for estate agents. The figures suggest that London tenants are still scrambling to fill rental properties in a frenzied market but that competition is beginning to cool as supply slowly improves.

“Although there are some early signs that the gap between supply and demand is starting to narrow a little, it will still feel very competitive for tenants trying to secure a home,” Tim Bannister, Rightmove’s director of property science, said in a statement on Friday (Apr 28). “Many agents are having to manage a very high volume of tenant inquiries for every property.”

Quarterly growth in national asking rents excluding Greater London picked up to 1.5 per cent with costs hitting a new all-time high of £1,190 per month.

Rightmove said that the supply of rental properties is currently still 46 per cent below 2019 levels. Compared with a year ago, it’s up 6 per cent because of levels of properties on the market near a record low. Demand is still high with the number of tenants making inquiries to move 48 per cent higher than 2019.

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The total stock of properties rented out has been flat in recent years while the number of tenants seeking a place is rising, adding strain to the system. Also, some tenants are staying in their properties for longer, and there’s been an exodus of buy-to-let landlords after a surge in both mortgage rates and the regulatory burden facing owners.

Meanwhile, tennant demand is being driven by higher mortgage costs, which have put the dream of owning property out of reach for many.

New figures from Office for National Statistics revealed last week that rents in London rose at their fastest pace in more than a decade. Private renters suffered a 4.8 per cent jump in prices in March compared to a year earlier, worsening the cost of living crisis for tenants. BLOOMBERG