Lettings: Autumn Update

Date Published 19 October 2023

As we head into darker nights and the chill in the air that Autumn brings. The lettings market shows no such chill and is as hot as ever. Throughout 2023 we have seen the same pattern as 2022, low stock levels equalling the continued rise in rents across Prime Central London. According to figures released by Lonres at the end of September, average rents across Prime Central London grew by 8.8% on an annual basis in August, taking them to the highest level ever recorded in their data. This increase took rents to 29.3% above their 2017- 19 (pre-pandemic) average. Also reported was an annual fall of 21.3% in agreed lets with only a 6.5% increase in new instructions.* Primarily these figures are influenced by the number of properties available to rent as nationwide there was a 5% increase in the number of potential new tenants actively looking for a new property in August compared to July. Increases in Prime Central London will have been higher with the influx of the student market that drives demand at this time of year.

Rental activity levels are close to 50% less than they were pre-pandemic due to the lack of instructions. The fall in lets is due to diminished stock levels and far from a lack of appetite from renters. This appetite remains strong, but applicants are having to open their minds to spreading their search further afield or play a waiting game. Rental demand far outstrips the amount of property re-entering the letting market and there are signs that a percentage of property is let off market without the need to list with applicants being proactive chasing agents for new listings and off market properties.

There are signs that that supply is slowly increasing, with an increase of 6.5% in new instructions in August. This is higher than a year ago and rental growth has eased back since this time last year into single digits from an average of 12.1% a year ago. Price reductions are also a good indicator on demand. Average discounts across prime London were typically around 6% to 10% from 2013 to early 2020. After rising in the early stages of the pandemic they fell sharply through 2021 and in late -2022 properties were even reaching more than 100% of their asking price on average in some months. While the market appeared to cool slightly on this measure in the first half of 2023 the latest data shows discounts fell again.

Last month saw the announcement that no legislation will be introduced to make energy efficiency improvements to properties. Many landlords were fearful that policies were to be introduced forcing them to upgrade the EPC rating of their properties to allow them to continue renting them. This is a positive step for the rental market, as a proportion of landlords would have been unable to invest in the improvements to upgrade their properties and would be forced to sell rather than remain in the rental market, especially when interest rates and inflation remain so high. Thus a further blow on stock levels across London and squeezed the market even further.

Now we are into the final three months of 2023 we expect the market will cool as December approaches, but the rental market still remains extremely reactive to new stock and listings with applicants and tenants waiting in the wings.

For any more information please do call us on 020 7589 3353 or email Kerry Morley kerry@ashdownmarks.co.uk

* Data obtained from Lonres