In some areas, London rental prices have fallen by as much as 10 percent compared to last year, reports Chestertons.
Real estate agents said the number of landlords reducing their rent demands in February 2024 increased by 125 percent.
Landlords are under pressure to fill their properties because, compared to 2022, there are almost 40 percent more rental properties on the market, but fewer tenants looking for a rental apartment.
“February did not see as many new tenants coming onto the market as many landlords had expected,” said Adam Jennings, head of lettings at Chestertons. “At the same time, the number of available rental properties continued to rise, leaving landlords little choice but to review their prices.”
This represents a dramatic reversal of the dynamics of London’s rental market from last year, when tenants competed for a shrinking number of apartments while rents soared.
Rent prices in London rose 31 percent between 2021 and 2023, and the number of postcodes where tenants could find a room for under £1,000 a month fell.
According to research by City Hall, low-income Londoners in their late 20s now spend 77 percent of their income on housing costs. Meanwhile, a recent report by Generation Rent found that there is no longer a single London borough where a bus driver, cleaner or care worker could afford to rent a flat.
But now the tide could turn, said Chesterton’s
“Landlords who have become accustomed to steadily rising rents since Covid and are unwilling to adapt to current market conditions are increasingly faced with vacant properties, a situation that has been very rare in the last year,” explains Jennings.
Landlords who rent out their properties on a short-term basis to tourists who stay just a few nights at a time may also face a rethink of their business model after the Government announced in last week’s budget the abolition of its tax breaks designed to encourage long-term rentals.
Several real estate institutes had previously warned London landlords that they had overshot the mark with the rent increases. “The market is already feeling the impact of reaching an affordability threshold in London, where rents already account for a much higher proportion of income,” said Savills.
“The tenants’ capacity to make higher bids has already been exhausted.”
Richard O’Donnell, chief executive of Zoopla, agreed that rents in London were too unaffordable to remain as high as they have been. “The UK has passed the peak of rental growth, which will be welcome news for renters,” he said. “London will lead the slowdown and act as a brake on the UK’s growth rate.” Zoopla’s latest rent index showed that rent increases in London were actually slowing compared to the rest of the country, but at £2,119 a month in December 2023, rents for a flat in the capital were still £130 higher.
