London rents have surged to their highest level on record and experts have warned there is little sign of the capital’s housing market improving any time soon, fresh figures out today reveal.
The cost per month of renting a property in London climbed 14 per cent over the last year to £2,501, according to search site Rightmove.
Red hot demand among renters for properties is rubbing up against chronically low housing supply, heating up competition between tenants to secure a home.
It means rents in the capital are now about £1,300 more than the national average monthly rent bill of £1,190.
Rightmove said that though “competition between tenants has eased by two per cent compared to last year… it is still more than double (+173 per cent) the level it was back in 2019” across the UK.
Supply of rental properties has nearly halved since the year before the Covid-19 pandemic, down 46 per cent across the country, while tenant demand is up 48 per cent over the same period.
That means prospective renters are outbidding each other to secure properties or landlords are able to raise rents sharply and still find tenants.
“With no significant influx of new properties becoming available to rent currently on the horizon, the mismatch is set to continue for some time,” Tim Bannister, director of property science at Rightmove, said.
A huge rise in buy-to-let mortgage – which landlords use to buy homes to let out – rates has strengthened incentives for landlords to raise rents. According to data provider Moneyfacts, average buy-to-let rates have jumped from 3.22 per cent to 5.56 per cent over the last year.
Over the last month, rents jumped 0.9 per cent in London, a slight slowdown likely in response to a small jump in the number of available properties in the city.
There is concern that sky high rents in the capital could make it less attractive for young graduates and working professionals, forcing them into other UK cities which, in turn, could push up rents elsewhere.
Renters have also been at the sharp end of the cost of living crisis as they are typically poorer and allocate a greater share of their monthly income to basic necessities.
Resolution Foundation research last week found they’ve been more likely to fall behind on rent payments than homeowners have on mortgage bills since inflation took off.
A spokesperson for the Mayor of London Sadiq Khan told City A.M.:: “This new research confirms what many Londoners already know: the capital’s 2.7m private renters continue to face soaring rent that, over the last 15 years, have far outstripped earnings.”
“This impact is felt by all renters – but especially by families on low incomes, who are doubly disadvantaged by government cuts to benefits and the cost-of-living crisis. London’s sky-high rents have created a situation where 49 per cent of children in private rented homes live in poverty, and where a quarter of renting households spend more than half of their income on rent.”
“Sadiq has repeatedly called on government to urgently introduce a two-year rent freeze, an emergency measure to ease the burden on renters while he continues to push for long-lasting reform of the sector. This would help build a fairer, more equal London for everyone.”
Khan has called for a cap on rents to ease the pressure on tenants’ finances, although economists say the move could squeeze supply by slashing landlords’ returns.
Andrew Boff, City Hall Conservatives housing spokesperson, told City A.M.: “Londoners deserve better than this Mayor, who would rather wreck the market with disastrous rent controls, than build the homes people actually want and need.”