The London rental market was hit hard by the pandemic, and it’s been slower to recover than other regions in the UK. However, new data reveals positive signs for buy to let landlords with properties in London, including rental growth and demand for property.
Historically, the London rental market has always led the charge to recovery for the rest of the UK following an economic downturn. However, due to the unique circumstances of the pandemic, this status-quo has been turned on its head.
London buy to let landlords have been hit hardest over the last 18 months; there were 14% more homes available in September 2020 than the year before. The lack of demand meant many landlords had to cut rent to attract tenants, and while the rest of the UK has, on the whole, bounced back, London has significantly lagged behind. Until now.
The latest research published by Hamptons reveals that not only is demand for rental property increasing in inner London, but rents are too. There are now 8% fewer properties available than in September 2019, and rents increased by 4.3% from May to June 2021, a clear sign of recovery. This rise in rents is the first since April 2020 for the inner city, taking the average monthly rent to £2,103. The number of people registering to rent in the city centre is up 16% on June 2020, and 45% on June 2019.
The research suggests that Zone 2 is the current hot spot for demand, demonstrating that people aren’t just returning to London’s outskirts, they want to live very centrally again. Notably, this increase is driven by domestic rather than international tenants, a trend that’s likely to continue until international travel, and in particular international students, returns.
With pandemic restrictions set to lift later this month, city life should begin to find its normal. While many of us may continue to work some days from home, reducing the number of daily commuters any London-goer is accustomed to, the full reopening of the hospitality and entertainment industries will bring its workforce back into the fold. With this in mind, experts predict inner London rents will return to pre-COVID levels within the next 12 months. While there’s a lot of catching up to do, this is undoubtedly the good news many buy to let landlords will have been waiting for.
According to Hamptons report, family homes are least available in inner London, with ‘entry level flats’ making up the majority of the stock here. Looking at the UK more widely, rental growth for four-bedroomed properties far outstrips those with just one bedroom; 9.5% vs 0.4% respectively.
Looking at London more widely, the picture has been more favourable for a while longer. In fact, rents here have increased 10% since March 2020 to an average of £1,685 per calendar month, with June being the 10th consecutive month of increases. UK wide, rental growth is 8.5% year to date. If you exclude London (which, as I’ve said, has been significantly slower than the rest of the UK), it’s 10.9%.
There’s no shying away from property prices, and I know it’s put some people off investing over the last few months. However, with prices set to continue to rise, you should quickly see a return on your investment. Furthermore, with buy to let mortgage rates the lowest I remember them being (in 20+ years of being a broker I might add!), it’s never been cheaper to borrow the funds!
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