Recent data analysis from LonRes, a renowned data consultancy, unveils a remarkable annual growth of 8.0 percent in prime London rentals during June. This surge catapulted rental rates to an impressive 28 percent above their 2017-2019 (pre-pandemic) average. This substantial uptick in rental prices underscores a robust demand in the market. Interestingly, a significant portion of properties are being leased quietly, evading inclusion in official data, reflecting a vibrant market. Consequently, the June data implies a 30 percent yearly decrease in agreed leases and a 0.9 percent dip in new property listings. Activity levels remain at approximately half of the figures observed before the pandemic.
While rental growth has been substantial across various property types over the past two years, there exist noteworthy differentiations. Notably, studio flats have witnessed the most substantial surge, experiencing a remarkable 29.0 percent increase compared to January 2020 rental values. This trend is closely trailed by houses and 3+ bedroom flats. Conversely, one and two-bedroom flats, which have historically been popular choices for rentals, have seen more gradual increments, hovering around 20 percent.
LonRes attributes these findings to two discernible trends. The first trend, favoring smaller properties, could be a result of post-pandemic shifts in work patterns. With individuals who had relocated from London returning to physical office spaces, there is an increased demand for compact pied-à-terre accommodations. The second trend is driven by affordability, as tenants opt to share larger properties instead of selecting one or two-bedroom flats.
Nick Gregori, LonRes’ head of research, comments on the state of the prime London lettings market in June, highlighting the ongoing rental growth coupled with a scarcity of new supply. He finds it particularly intriguing that the most robust rental growth has been observed in smaller properties, which underscores the evolving work patterns and the rising influence of affordability concerns.
In summary, the prime London rental market is currently undergoing vigorous annual growth, with rental prices soaring above pre-pandemic averages. The demand for rentals is so intense that numerous properties are securing leases without even being formally listed. The distinctive dynamics of the market are evident in the varying growth rates among different property types, with smaller accommodations leading the charge. These trends underscore the shifting landscape of work patterns and the growing importance of affordability considerations. The prime London rental market continues to offer opportunities and challenges for both tenants and landlords alike.