London’s landlords feel the squeeze as tenants push back

London’s landlords feel the squeeze as tenants push back

0:02 AM, 8th May 2024, About 2 months ago 4

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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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Comments

northern landlord

10:43 AM, 8th May 2024, About 2 months ago

Tenants are pushing back by being unwilling or more likely unable to pay asking rents. As a result maybe there are more properties available to rent but there are not more properties overall as numbers continue to dwindle. Landlords are faced with two choices, reduce the rent to attract tenants or if this is not a financially viable option, sell up. This last option being made even more attractive with the prospect of the RRB around the corner.

PAUL BARTLETT

12:08 PM, 8th May 2024, About 2 months ago

Reply to the comment left by northern landlord at 08/05/2024 - 10:43
Sadly for the good actors in this there will be no accountability as the decision makers are long gone.

Section 24 disaster has no impact on the fool Osborne who sponsored it nor the HM Treasury civil service who thought it up.

It will be no consolation that Gove is not in government to the PRS. The damage was done.

Reluctant Landlord

18:34 PM, 9th May 2024, About 2 months ago

“These properties may revert to the lettings market if the asking price is not achieved."
Err no. If the LL is selling due to tax reasons, red tape and the impending RRB (as the article highlights) then they are not want to going to get another tenant in if the property is now vacant are they? What a stupid statement.
More than likely to leave the property empty if they can. It might be worth a punt doing this just to see what happens after the GE & RRB.
If more landlords decide to give T's notice (before or immediately after) a possible Labour win and inevitability of a supercharged RRB, then that's going to prove to be a rental disaster - more looking and even less supply. Councils are going to be swamped and everyone else is going to be forced to pay top dollar AND stay where they are. There is going to be nowhere cheaper. The reality is at best it gets worse, or the rental market literally implodes. Labour - 'the voice of the Tenant' are going to be crucified.
That may mean that house prices drop of course a little, but that means there may be T's that sensibly look to taking out a mortgage themselves to get out of the rental market themselves. Your property is empty already, that makes it very attractive!
Or wait a little longer and what we are all thinking will have to happen.... plans will have to be put in place to then encourage LL's to once again rent out their properties to help with the now even bigger crisis which has come about, directly due state interference in the PRS in the first place.....
The cycle of stupidity.

Stella

23:11 PM, 9th May 2024, About 2 months ago

The cycle of stupidity just about sums it up.
I am leaving some property empty that is now worth a lot of money which I have owned for over 40 years because of the stupidity of this government and the worry of what might happen under Labour.
I am sure that I am not alone.

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