What’s happening with the prime London rental market?
What we saw last year across much of the prime market was like-for-like activity when compared to 2019.
While we did endure six weeks of lockdown restrictions, a handful of essential moves were able to take place, but the rest of 2020 performed relatively well considering the disruption, making up for the lower volume of transactions during the six weeks of lockdown.
So it’s fair to say that actually, the pandemic impact on the prime rental market was fairly muted both in terms of the number of rental applicants and the level of stock reaching the market.
However, particular price brackets that normally perform very well did underperform – sharers were bailing on the market with jobs being furloughed meaning the two-bed circa £450 per week apartments suffered. Studio flats fell out of fashion with not many people interested in being locked down in a small space. Best performers were the houses as they were scarcely coming on and when they did they were snapped up pretty quickly.
The first half of 2021 was a little more sluggish with the balance between supply and demand weighted slightly more towards oversupply. While domestic applicant numbers were reasonable, travel restrictions continued to prove problematic for foreign renters. However, this did improve on a monthly basis throughout the year.
The pandemic was always going to interfere with market activity and the immediate impact was predictably a drop in applicant levels.
By late summer last year the lettings market had improved but still wasn’t operating at pre-pandemic levels. Even in spring this year the market had been challenging to navigate creating a mixed picture with pricing.
Who is pushing the market forward?
However, over the last quarter, it has certainly returned to pre-pandemic levels. There has been a dramatic increase in enquiry levels from those relocating from abroad and this has had a positive impact on pricing.
Of course, the latest development of the Omicron variant is expected to dampen this in the short term, but we’re now seeing supply squeezed to the point of stock scarcity. So much so that there is little to offer those already committing to the market.
It’s a certainty that international movers will continue to be the deciding factor behind rental market health in prime London and Covid has only reaffirmed that they are essential for the performance of the market.
Throughout autumn, we saw an influx of American families looking to secure rental homes ahead of the school year. There was a limited level of high-end housing available and so many of them were securing properties after only seeing it on video.
That’s not to say they are the only ones influencing the market. Domestic movers from outside of London have made a return, there’s a returning degree of student demand and there has also been activity from those already in the area looking to up or downsize.
What’s more, heavy flooding throughout autumn also left the Notting Hill and Kensington areas suffering heavily from flooding, particularly the lower ground flats. This resulted in an even higher number of applicants looking as insurance companies scrambled to secure temporary homes for them.
Biggest challenges facing the market?
We definitely don’t want another pandemic and we are hoping that this latest variant doesn’t cause the nation to move backwards rather than forwards.
However, unknown events that can upset the stability of the rental market at any point and Covid will no doubt be a lingering consideration for some time to come.
The more immediate issues facing the market are inadequate stock levels.
Looking ahead we have to wonder what the solution is if more tenants are choosing long-term renting as a lifestyle but buy-to-let stock is dwindling.
Is buy-to-let out of fashion because the appetite is no longer there when yields are lower and long term landlords have seen the government fail to support them with the introduction of the tenant fee ban and changes to stamp duty and tax thresholds for buy-to-let purchases?
Build-to-Rent is becoming more popular and it may fill the gaps but space for such developments is limited within the prime market.
Rental Hotspots in 2022
Huge money has been spent across areas such as the Battersea PowerStation, Embassy Gardens, Fulham’s Imperial Wharf and Elephant & Castle. They’ve been completely redeveloped to the highest standard with the on-site retail and leisure amenities that appeal to the modern-day tenant.
The Tech industry in London is flourishing, and areas such as Hackney and Shoreditch are going to continue being major beneficiaries of this in my opinion. The Tech industry is only set to grow over the coming years which is likely to lead more tenants flocking to the areas that surround their workplaces, either relocating from abroad, outside of London or otherwise changing up from their tenancies elsewhere in London and opting for apartments with all the modern benefits and without the commute.
This combination of high-end living that mirrors the experience many foreign tenants are already used to, coupled with the fact that there will be an influx of rental stock, should see these areas perform very well over the next year.
That said, I believe the Prime Central London market will otherwise continue to move forward in a positive manner as there is further recovery from the pandemic. This will only intensify as more and more people get back to working in offices and are no longer restricted from crossing borders in order to do so.
Rob Pratt director of lettings at central London estate agency Bective’s Notting Hill Branch