London rents stabilise as tenant budgets rise

London rents stabilise as tenant budgets rise

0:01 AM, 24th December 2024, About 14 hours ago 1

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London’s private rented sector has shown signs of cooling in recent months, despite increased tenant budgets, Foxtons reveals.

While tenants have been willing to spend more, the anticipated surge in competition and shortage of rental properties has not materialised.

The agency says that average rents in November were £541 per week, a 5% drop compared to the previous month.

This rent is lower than in 2022 and 2023.

Year-to-date rents, Foxtons says, have fallen by 2% compared to the same period in 2023.

Rental demand was steady

The firm’s managing director of lettings, Gareth Atkins, said: “Rental demand was steady and persistent in 2024, even as the number of listings increased – reaching 7% higher than 2023 by the end of November.

“So, although this market had more of the traditional seasonality than we’ve seen in recent years, it was still highly competitive throughout, with an average of 15 renters per each new listing year to date.”

He added: “As we step into 2025, the lessons of 2024 are clear: success requires not just property, but proactive, intelligent market engagement for buyers, sellers and landlords alike.”

Landlords have left the sector

While some landlords have left the sector, the number of listings is up to offer more tenant choice.

However, the agency’s data shows there were regional variations in renter demand.

Central London saw a significant 15% increase in applicant demand year-to-date, while west London experienced a 20% drop.

While there has been a 2% increase in tenant budgets year-to-date, reaching an average of £525 per week in November, the impact on rents has been limited.

This suggests that landlords may be more cautious in raising rents, potentially due to increased competition from new listings.


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Rod

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11:47 AM, 24th December 2024, About 2 hours ago

London's PRS landlords clearly have a better grasp of economics than Rachel Reeves, recognising that higher demand for a product allows pricing to rise, but when that demand falls, or additional supply enters the market, prices are likely to fall back.
What these stats ignore is that the two comparison years were immediately after the pandemic, where we saw the great move from city to country. We also had the massive rise in interest rates.
Some of the rent rises over that period were driven by the renewal of 2 year discounted tenancies when demand slumped during the pandemic.
As interest rates rose back to more historic norms, it also showed the geared effect of S24, particularly for those on lenders' variable rates, with the impact masked until landlords filed their tax returns 9 months later.
Throw in the growth of additional and selective licencing schemes and it's a wonder more landlords have not sold up.
With the prospect of the RRB removing fixed terms and longer periods to recover property and debts, even those without mortgages have been forced to be less charitable and move their rents closer to market levels to provide a margin of safety.
Never mind, landlords will move from their market led approach to rent increases and will join the social sector with one way (upward) index linked rent rises.
With inflation forecast to stay higher for longer, and the rise in the minimum wage, perhaps we should thank the Chancellor for some parts of her budget.

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