Prime London rental values witnessed a notable decline in January, moving closer to their long-term average, reveals data from real estate experts Knight Frank. While the overall market saw an annual growth of 7.2 percent in prime central London, this figure starkly contrasts with the 18.3 percent recorded a year earlier. The pre-pandemic five-year average depicted a modest fall of 0.8 percent.
In the outer boroughs of London, the rental landscape showed a growth of 6.2 percent over the past 12 months, providing tenants with a more favourable figure compared to the 16.4 percent reported in January of the previous year. However, this growth stands in contrast to the pre-Covid five-year average of a 1.6 percent annual decrease.
Knight Frank attributes the surge in supply to a relatively subdued sales market. Low transaction volumes and minimal price growth have prompted more property owners to explore the rental market as an alternative. This trend is particularly pronounced in higher-value markets.
During the pandemic, an active sales market, coupled with a 14-month stamp duty holiday, led to a decline in the supply of rental properties as owners seized the opportunity to sell in favourable conditions. Rightmove data reveals that new rental listings in prime central and prime outer London were seven percent below their five-year average in the final quarter of the previous year, marking a significant shift from the declines of 29 percent and 40 percent in the last quarters of 2022 and 2021, respectively.
As the supply of rental properties returns to more normal levels, a growing number of landlords are finding themselves compelled to reduce asking rents. The market is grappling with uncertainty, fuelled not only by the ongoing Renters Reform Bill in Parliament but also by concerns about a potential Labour government.
The Renters Reform Bill, designed to grant tenants more rights, including a ban on Section 21 evictions, faces an uncertain fate amid speculation of an impending general election. Experts are worried that time constraints may hinder the legislation, adding a layer of unpredictability to an already fluctuating market.
Tom Bill, Head of Research at Knight Frank, expresses concerns about the potential impact of a Labour government, stating, “What might an incoming Labour government do if time runs out for the Tories? Given what some on the opposition benches have said about how much further they would go than the current proposals, they are unlikely to reverse the flow of departing landlords or reduce the upwards pressure on rents any time soon.” As the political landscape remains uncertain, London landlords are closely monitoring developments, bracing for potential shifts that could reshape the city’s rental market.