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Record rent rises seen across the capital – is the London exodus over?

Over the past few months, a complex series of factors have contributed to a more challenging set of circumstances for the property market, such as the ongoing war in Ukraine, the global cost of living crisis and a rise in interest rates.

But despite these disturbances, tenants who moved away during the pandemic are now returning to London, pushing average rents up to £1,886.

The figures not only reveal a growing demand from renters who are seeking the urban lifestyle London offers as they continue to work remotely, but also a renewed confidence in the buy-to-let sector from landlords in the capital.

Here, we analyse the findings and uncover how landlords can prepare for the surge in demand when letting their property.

London leads the charge in rent rises

According to a lettings index, nearly one third (30%) of all new tenancies in the capital have been secured by someone moving from outside of London in 2022.

Rents in the capital have risen by 12.3% over the last 12 months, from £1,680 to £1,886. The increase is even sharper in inner London, where rent prices soared 22% to £2,513 in just one year.

This is in contrast to 2020 when just 12% of London tenants came from outside the city, a time when people left the capital to rent in more affordable areas as the pandemic squeezed the economy – and also to escape to the countryside and the coast while Covid raged and stripped away nearly everything that is attractive about London living, for example the bars, the restaurants, the theatres, the museums, the music festivals and the cultural events

Such strong rental growth is underpinned by the lack of homes coming to the market, with research showing there were 30% fewer properties available to rent in April this year than April 2021.

Meanwhile, the fall from pre-Covid levels comes in at almost two-thirds (61%). London has seen a 64% drop in rental stock, with few signs of more homes coming onto the market.

A return to urban city life

At the height of the pandemic, many students and professionals worked remotely to adhere to social distancing measures.

This enabled tenants to look beyond the city to more rural locations, exchanging transport links for ample space and quieter surroundings to fit their new work-life balances.

However, with the pandemic waning and officesreopening, demand in city centre locations is bouncing back, leading to an upward pressure on rents – a welcome development for landlords.

Anthony Breach, senior analyst at the Centre for Cities, said that people are increasingly drawn by the wealth of work and leisure opportunities in the capital.

“After two years of not having any urban amenities, big cities in particular are even more attractive,” he said.

“These post-industrial cities that had a very difficult 20th century have turned around and have become places of increasingly productive and specialised economic activity – and that process is still incomplete.”

A good opportunity for landlords?

Despite the current challenges for landlords, data from Zoopla shows that the average tenancy length continues to climb as renters are staying put, meaning fewer void periods.

The average time between rental listings coming to the market has also risen by five months, from around one year in 2017 to 75 weeks in March 2022.

As demand from students and office workers returns, landlords and buy-to-let investors will need to consider the key trends influencing the market.

In particular, proximity to transport links with the launch of Crossrail this year, as well as large-scale regeneration projects throughout the city, are offering significant growth potential.

If, as a landlord, you can offer a desirable rental property that suits the needs of today’s tenants, you’ll have a much wider pool of prospective renters to choose from, especially at a time when demand continues to bounce back at record levels.

Here at Holland Properties, we have been an established estate and letting agent since 1999 and can assist you with the management of your tenancies. We operate across London, with our head office based in Docklands.

For further guidance on any part of the lettings process, please contact us today. You can also request a free and instant online valuation to see how much rent you could be charging in the current marketplace.