Rents have risen at the highest rate ever recorded in London’s most expensive areas as renters returning to the capital post-pandemic far outnumber homes available to let.
Data from Savills shows that, between 1 January and the end of September this year, rents grew by 13.7 per cent across prime London districts – the steepest increase since the firm’s records began in 1979.
Prime London refers to some of the most desirable —and the costliest— parts of the capital, including Kensington, Mayfair and Chelsea in the centre, for example, as well as areas like Hampstead, Shoreditch, Fulham and Chiswick.
The average rent across all property types in London was £2,257 per month between April and June, according to Rightmove.
Since the end of June alone, rental prices have increased by 3.3% on average – equivalent to an extra £74.48 on a £2,257 monthly rent. A 13.7% annual rise represents an additional £309.21 per month – or £3,710.51 per year – on the same rent.
Rents are rising most dramatically in north-west London, with Maida Vale, Little Venice, Primrose Hill and St John’s Wood combined averaging 6.1% growth over the past three months.
Amelia Greene, a director at Savills, said that Maida Vale is proving particularly popular with students and young professionals returning to the city post-pandemic because of its concentration of mansion blocks and flats. Its transport connections are also desirable for commuters.
“Maida Vale in particular has seen a significant uptick,” said Greene. “We actually triple-checked the numbers, because they were so much higher.”
The availability of green space has also drawn renters back to areas like Primrose Hill and Hampstead, where demand slowed in the past year.
In north and east London, likewise, rents have also risen significantly, with a 4.3% increase. In part, this is driven by renters returning to Clerkenwell and Shoreditch, which lost popularity during the pandemic “race for space”.
In contrast, the areas of south-west London, where people headed for that same space, are now seeing slower rates of growth, at just 1.8%. Similarly, in London’s commuter belt, prices remain more stable.
In central London, rents have increased by 3.4%.
According to Savills, demand for rental properties is at its highest-ever level, with the number of renters significantly outnumbering the number of homes available.
As students and young professionals have returned to the capital since the pandemic, Savills have reported a 70% increase in demand for rental properties since August 2019.
Accordingly, rents for flats are rising faster than rents for houses, largely because of students and the return of overseas demand.
At this time of year, Greene said she would usually expect the market to slow down. This year, however, she said she is seeing almost 40% more applicants than usual for properties, mainly students.
As a consequence, rental properties, particularly one or two-bedroom, are receiving multiple bids and huge demands. Greene said that she received 138 enquiries in three hours for two properties she listed last week in Earl’s Court.
“As early as March and April this year, students were already looking to secure properties for the new university term, because they’d heard on the gravevine that there would be no chance if they waited any longer,” said Greene.
Jessica Tomlinson, research analyst at Savills, is optimistic that the situation will improve. “The current rental price growth trajectory cannot be sustained. With the sales market slowing, we would expect to see more accidental landlords enter the market, whilst post-pandemic pent up demand should also start to normalise towards the back end of the year,” she said.
This is echoed by Savills’ agents, more than half of whom said that they expect to see more rental properties on the market in the coming months.
For now, however, high rents and the shortage of available properties are having a knock-on effect across the capital, as prime London renters are forced to look elsewhere, fuelling a rise in cost.
“Applicants are having to spread their nets far wider and consider areas outside of prime London to actually secure a property,” said Greene. “There isn’t an area [in London] that has not seen unprecedented levels of demand this year.”
Of course, as supply goes down, prices go up. Greene said: “Rental prices have increased across the whole country due to supply and demand issues. That’s been the primary reason for driving rents up.”
Rent hikes are increasingly forcing Londoners out of their homes, with a shortage of rental properties pushing some out of the capital altogether.
Polly Neate, chief executive of Shelter, said that “runaway rents will deal many renters a knock-out blow” and called for the prime minister to end the freeze on housing benefits to avoid “an explosion in homelessness”.
Last week, the Mayor of London, Sadiq Khan, repeated calls for a rent freeze in the capital, citing evidence that half of private renters are paying a premium to heat poorly insulated properties.
