London rental prices have dropped by up to 10 per cent in some areas compared to last year, reports Chestertons.
The estate agents said they had seen a 125 per cent increase in the number of landlords lowering their asking rents in February 2024.
Landlords are under pressure to fill their properties as there are almost 40 per cent more rental properties on the market compared to 2022, but fewer tenants looking for a place to rent.
“February didn’t see the volume of new tenants entering the market that many landlords had expected,” said Adam Jennings, head of lettings at Chestertons. “At the same time, the number of available rental properties continued to rise which has left landlords little option but to start reviewing their prices,”
It’s a sharp reversal of the London rental market’s dynamic last year, where tenants were competing for a dwindling number of homes while rents soared.
London rental prices rose 31 per cent between 2021 and 2023, and the number of postcodes where tenants could find a room for under £1,000 a month dwindled.
An investigation from City Hall found Londoners in their late 20s on low incomes are now spending 77 per cent of their income on housing costs.Meanwhile a recent report from Generation Rent revealed that there is no longer a single London borough that would be affordable for a bus driver, cleaner or care worker to rent in.
But now the tables could be about to turn, said Chestertons
“Landlords that have become accustomed to continually rising rents since Covid and aren’t willing to adjust to the current market conditions are increasingly finding themselves with empty properties, a situation which was very rare last year,” explained Jennings.
Landlords renting out their properties on a short-term basis to tourists staying just a few nights at a time may also be about to reconsider their business model after the Government announced it will abolish their tax breaks to encourage more long-term rentals in last week’s budget.
Several property institutions have previously warned London landlords that they had overshot with rental increases.“The market is already feeling the impact of hitting an affordability ceiling in London, where rents already take up a much higher proportion of income,” said Savills.
“Renters have already exhausted their capacity to bid upwards.”
Richard O'Donnell, executive director of Zoopla, agreed that London rents were too unaffordable to remain as high as they were.“The UK is past peak rental growth, which will be welcome news to renters," he said. "London will lead the slowdown, acting as a drag on the UK growth rate."Zoopla’s latest rental index indicated that London rent rises were indeed slowing compared to the rest of the country, but at £2,119 a month in December 2023 it was still £130 more each month to rent a home in the capital.
