Rental Values Fall but Political Uncertainty Rises in Prime London Lettings Market
January 2024 PCL lettings index: 219.4
January 2024 POL lettings index: 220.9
2 minutes to read
Rental values fell closer to their longer-term average in January, as supply continued to increase.
Annual growth in prime central London (PCL) of 7.2% in January compared to 18.3% a year earlier. In the five years before the pandemic, the average figure was -0.8%.
In prime outer London (POL), rents grew by 6.2% over the last 12 months, which was a more palatable figure for tenants than the 16.4% recorded last January. However, that compared to a pre-Covid average of -1.6%.
Supply has been rising due to a relatively subdued sales market, where low transaction volumes and minimal price growth has led to more sellers exploring the rental option. The trend is more visible in higher-value markets, as we explored recently.
An active sales market during the pandemic, particularly throughout a 14-month stamp duty holiday, meant the supply of rental properties fell as owners capitalised on buoyant conditions by selling up.
New rental listings in PCL and POL were 7% below their five-year average in the final quarter of last year, Rightmove data shows. That compared to a decline of 29% in the last three months of 2022 and an equivalent drop of 40% in 2022. The result of supply returning to more normal levels is that a growing number of asking rents are having to be reduced.
Landlords have been leaving the sector in recent years primarily due to more red tape and tax. Even those who haven’t sold up typically prefer shorter tenancy lengths to leave themselves the flexibility to do so.
As well as the prospect of tighter green regulations, the Renters Reform Bill currently going through Parliament is designed to provide tenants with more rights, including a ban on no-fault evictions.
However, there are growing concerns among some at Westminster that the impending general election means the government may run out of time before it can bring in the new legislation, creating even more uncertainty.
What might an incoming Labour government do if time runs out for the Tories?
Given what some on the opposition benches have said about how much further they would go than the current proposals, they are unlikely to reverse the flow of departing landlords or reduce the upwards pressure on rents any time soon.