The average house rent in London has risen by 5.6 per cent between the second and third quarter of 2019, according to Rightmove
London has been one of the top global property investment hotspots, attracting investors into the residential, commercial and residential sectors. The status of being one of the financial centres in the world has helped the city achieve the position of a property investment centre. Investors across the world have poured in pounds across the components of the city’s residential sector.
However, the sector has undergone a change due to brexit. The uncertainty around brexit has disrupted the otherwise buoyant sector, leading sellers defer their plans to buy property. The property sector is seeing a downward trend as supplies have fallen and prices risen. The sector has been affected by factors both within and beyond the sector.
According to Rightmove, the average house rent in London increased by 5.6 per cent between the second and third quarter this year, which represents the largest quarterly rise since Rightmove began recording the data and has brought the average asking price up to £2,104 per month.
But the rise in average house rent in London was less in areas outside the city, where the average rent rose by 3.2 per cent to £828 per month during the same period, which is the greatest quarterly increase outside of the capital since 2015, says the property firm.
The number of available properties to rent is 13 per cent under the previous low recorded in 2015 across the UK, whereas in London this figure is down by 24 per cent. Rightmove cited factors such as the introduction of stamp duty surcharge on second homes, a phasing of the reduction in tax relief and the ban on tenant fees as reasons for the fall in supply and increase in price.
However, a significant number of landlords intend to move out of the sector partially due to legislation changes, among other factors. The research revealed that despite the rising rents, 24 per cent of landlords intend to sell at least one property from their portfolio. Legislation changes, including the recent tax relief alterations and the ban on tenant fees was the most common reason for their decision to sell their property.
Rightmove commercial director and housing market analyst Miles Shipside says: “There are a number of forces at play in the current rental market, all leading to record rents for tenants and fewer homes to choose from, yet demand remains strong.
“Worryingly for tenants there are signs that the stock shortage may worsen if some landlords follow through with their plans to sell up, though an increase in plans for build to rent properties may help to fill some of the gap.
“The overall feeling among those landlords who are planning to exit the market is one of frustration with many telling us that the tax changes mean it is no longer financially attractive to keep their properties.
“Early data seems to point to some of the income lost through the removal of tenant fees being passed on to the tenant in higher rents, but it should still work out cheaper than paying the upfront admin fees as long as stock does not constrict and rents do not rise too much.
“What we really need now is more properties available to rent. Rising rents may tempt some landlords back in, but momentum is currently to downsize portfolios in spite of the prospect of increasing yields.”