Due to the Stamp Duty deadline, there has been so much attention on the booming sales market of late. But, recent data reveals there has also been a rental market boom. The rental market has recorded a solid month, with rents rising and voids (periods of rental vacancy) continuing to decrease across the country.
According to the latest figures, June 2021 saw voids drop in nearly all regions, with Greater London and many other parts of the country all reporting a fall. The average void period across England is now 16 days, down 30% from 22 days in May 2021.
Rental market boom - A leap in demand
London’s rental market is showing signs of a strong recovery according to recent data reporting a 17% rise in new tenant registrations and a further 10% increase in letting agreements.
Despite this, inventory is still down, with a 3% reduction in supply reported in May when compared to April 2021, and a significant 24% reduction year-on-year compared with May of 2020. With low inventory and high demands, fewer landlords are currently willing to drop their rental rates - a stark contrast to one year ago, when so many London landlords had no choice but to drop their rents by as much as 20% to stay afloat and remain tenanted. The figures show that now is a great time for landlords to be listing rental properties, or to consider putting their property on the rental market.
Some of the biggest rental increases have been in London postcodes such as Mayfair (23%), Westminster (18%), Barnes (17%), Wandsworth (15%), and South Kensington (12%). Check out our London Rental Yield Map for up-to-date information on which areas are the top performers, or our Q2 research on the best rental yields in London.
According to Portico’s Ed Lugg, the seemingly imminent return to offices is significantly turning the tide, and with rents still relatively low in some areas, tenants are rushing in to snap up rentals before the increases push them out of the market. “As travel opens back up and restrictions continue to ease, tenants are increasingly wanting to return to London, and the next few months should see the London rental market grow increasingly more competitive once more,” he said. “Agents will need to stay on their toes as they shift from an unprecedented period of sales activity straight into a rental demand spike.”
Rents rising to record highs
New data for June is reporting that the average UK rent now sits at a record high of £1,007 per calendar month (pcm) - a figure up 5.9% year-on-year, and 9% up on June of 2019.
Despite the adversity of the pandemic conditions, the rental market in London has experienced its first price increase in over a year, with a 1.5% annual rise to £1,607 pcm. However, this figure is still currently sitting lower than the pre-Covid average of £1,611 in June 2019.
Check out our recent in depth research on the current rental prices across all London boroughs.
Until inventory significantly rises and rental prices soar further, however, thanks to the strong property price growth, it is still cheaper to rent than buy when it comes to monthly expenses.
In May 2021, it was an average of £71 per month cheaper for a first-time buyer (based on a 10% deposit down) to rent a property than to buy one. While average monthly mortgage payments sat at £1,125, renters were spending an average of £1,054 on monthly rent.
Since the onset of the pandemic, London has witnessed the most significant shift when it comes to the affordability comparison of buying versus renting. A buyer putting down a 10% deposit to buy a London property in March 2020 would have been £123 better off per month than renting.
Falling rents and rising property prices have made renting in the capital cheaper than buying by a larger margin than that of any other region in Great Britain. In May 2021, it became cheaper by £251 per month to rent in London.
As discussed, however, rental prices are on the rise and as soon as inventory catches up, this gap in affordability is expected to narrow. For the foreseeable future, though, the demand for rentals in the capital is expected to continue, as the many draw cards to city living reopen their doors and life returns to some modicum of normalcy.
Are you considering becoming a landlord?
It could be a very lucrative time to become a landlord in London, and with the advancements of technology revolutionising the sector, it could also prove easier than ever.
Ideally, consider embracing such new services and streamlined tech-based processes such tenant verifications and rental payment processing. This may all seem daunting, but the resources on the internet these days are immense and you could self-educate yourself to claim your piece of the London rental pie in no time.
If you’d rather outsource some or all of the workload, check out our Concierge, Comprehensive or Essential letting packages, providing you with cost-effective property management services which can take all the hassle out of being a landlord or help with just the bare bones of finding a tenant and getting your property let.
You can also utilise the services of Airbnb with Portico to fill your properties during any void periods to maximise your annual rent returns.To get started, use our rent calculator tool to get an accurate idea of what your property is currently worth on the rental market.
Read More: Renting Out A Property For The First Time: Everything You Need To Know
Must-know legislation changes
Whether you are a seasoned landlord or just getting started, there are some recent legislation changes that may affect you, including:
- Right-to-rent rules for EU citizens
Citizens from the EU, Switzerland and EEA who have applied successfully for a UK Visa or EU Settlement Scheme now need to utilise the government’s new online “View and Prove” service to share their approved right-to-rent status with letting agents and landlords.This means that, as of 30th June, it has become mandatory to factor this step into your tenancy approval process.
- Anti-money laundering rules
Any letting or estate agent receiving an equivalent of €10,000 or more per month for a single rental property is now subject to new legislation regarding anti-money laundering. Relevant agents should have registered with HMRC by 10th June, so, if you missed this deadline, act quickly to lessen your chances of being fined.
- Electrical Safety Standards for the Private Rental Sector (England)
These new regulations came into force in June 2020, and apply to any existing tenancies from April 1st 2021. They require that five-yearly electrical installation inspections be carried out on all tenanted properties, with tenants being supplied with an inspection report. If you manage or own a tenanted property that hasn’t passed an electrical inspection since the 1st June 2020, you are in breach of these new laws and you need to act quickly to rectify it. We can help with this process, and have our own in-house handyman team who can ensure your property is fit for habitation and meets all checks.
There are, however, some exceptions. These certificates are not required for those on leases over seven years, social housing, student halls of residence, care homes, hospices and hospitals, hostels and refuges, and other accommodation properties relating to healthcare.
With the ban on evictions now lifted, the notice that landlords must give to their tenants has decreased to four months in England, effective from 1st June 2021. It is expected that this will remain in place until September 2021, after which the notice period will drop further to two months. Certain conditions such as a breach of immigration rules or anti-social behaviour can see these time periods reduced.
With the country’s lockdown restrictions easing, and work and lifestyle doors swinging back open, the London rental market boom is no great surprise. It’s an exciting time to get in on the action, and if you need some advice on how to, or you are interested in Portico managing your rental property, get in touch with us on 020 7099 4000 and see what we can do for you.
Don’t forget to use our rental calculation tool to assess the value of your property for rent, and consider how Airbnbing your property could make a big difference when it comes to filling those frustrations voids. At Portico, we can manage both simultaneously, so we can Airbnb your property right up until we find a long-term tenant.
We look forward to hearing from you and seeing what we can do to be a part of your journey as a successful landlord!