Demand is coming from various sources, including the return of international students ahead of the academic year
The switch from a tenant’s market has been swift, say Knight Frank, which has seen a 73% rise in the number of new prospective tenants registering with them since August 2019.
The 2019 lettings market was already strong. However, record low stock levels compounded by high demand exacerbated by the pandemic, mean landlords are now in a strong position.
Gary Hall, head of lettings at Knight Frank, comments: It’s turned into a landlord’s market in recent weeks and that has happened very quickly. Supply is tight in some areas and demand has gone through the roof.
Supply is low because, in similar fashion to parts of the sales market, the shelves have emptied quickly due to strong demand. Furthermore, many would-be landlords sold in order to take advantage of the frenetic sales market in the first half of the year caused by the stamp duty holiday.
Meanwhile, demand is coming from various sources, including the return of international students ahead of the academic year.
As more workers plan for their return to the office, this has also driven demand higher. Not only was the number of new prospective tenants 73% higher in August than the same month in 2019, it was the highest figure recorded by Knight Frank over the last five years. The second highest was July this year and June 2021 was the third highest month over the last five years.
A second wave of workers is now planning for the full re-opening of offices, which is leading to a scarcity of rental properties in areas around the City, Southbank, Islington and as far out as Wandsworth.
In some areas, lettings properties are coming onto and off the market on the same day, said Gary. The competition is so fierce that some prospective tenants are taking a property based on a single virtual viewing from their desk at work.
As supply and demand re-balance, it has put upwards pressure on rental values, which had fallen steeply in some areas during the initial months of the pandemic. In the year to August, average rents in prime central London fell by 8.7%, following a quarterly rise of 1.2%, which was the biggest increase over a three-month period since July 2018.
In prime outer London, the average annual decline was 6.4% in August after a quarterly gain of 0.9%, the biggest three-month rise since June 2018.
Knight Frank suggests that rents will end the year flat in both parts of London by the end of 2021, with supply only likely to pick up modestly in the final four months of the year.
