London’s landlords feel the squeeze as tenants push back

The good news for renters in the prime areas of London is that rocketing rent increases are finally easing up, one rental index reveals.

According to Knight Frank, rent growth in prime London postcodes has narrowed to levels that haven’t been since seen the summer of 2021.

However, the index also highlights that there are signs of landlords increasingly looking to sell.

Average rents are still ticking upwards with prime central London average rents growing by 4.9% in the year to April.

The figure for prime outer London rents was 4.4%.

Growth slowdown is the result of rising supply

The firm’s head of UK residential research, Tom Bill, says the growth slowdown is the result of rising supply after an ‘active sales market’ in the pandemic that was boosted by the 14-month stamp duty holiday.

That led to the capital’s lettings stock falling as owners capitalised on a buoyant market by selling.

Mr Bill said: “On top of that, landlords have also been leaving the sector in recent years due to proliferating red tape and tax.

“Those who haven’t sold up typically have preferred shorter tenancy lengths to leave themselves the flexibility to do so.

“While that is good news for tenants, the fact rental value growth has calmed down over the last six months is potentially another disincentive for landlords.”

‘Tenants are increasingly pushing back’

The property firm says this shift in power dynamics is giving tenants more leverage and Mr Bill said: “Tenants are increasingly pushing back against the sort of large rent increases that have been common since then, either by re-negotiating or leaving at the end of the tenancy.”

He also says that the Renters (Reform) Bill is ‘adding to the mood of uncertainty’.

He adds that the changes to the private rental sector being proposed by the Conservative Party could be expanded by Labour if they win the next General Election.

‘More landlords are considering a sale’

Mr Bill said: “Several months ahead of a general election, there are early signs that more landlords are considering a sale.”

The index also shows that the number of new lettings instructions was 4% lower in London last month compared to the same month last year.

Sales instructions are up by 16% over the same period – but prices either flat or falling.

Mr Bill said: “These properties may revert to the lettings market if the asking price is not achieved.

“Overall, lettings supply has grown in recent years, and new instructions were 11% higher over the first four months of this year than the same period two years ago, a time when rents were growing by over 20%.”

As rents continue to increase and sales values decline, gross average yields have risen – it is 4.24% in prime central London which is the highest since March 2007.

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