Recent reports from lettings agency Foxtons and data consultancy LonRes suggest a return to pre-pandemic normality in London’s rental market. Foxtons highlighted a 24% month-on-month decrease in applicant demand for December, aligning with the seasonal decline typically observed in the lettings market. Examining the broader trend, overall demand in 2023 registered a 12% drop compared to 2022, with a notable decline starting in July. This shift indicates a return to more normalized market activity after the exceptional circumstances of the previous year.
In this evolving landscape, property market observers can cautiously interpret these findings as signs of stability. The gradual decline in demand, especially in the second half of the year, suggests a recalibration towards pre-pandemic conditions. As London’s rental market adjusts, monitoring these trends provides valuable insights for both landlords and tenants navigating the evolving dynamics of the real estate landscape.
The substantial 22% year-on-year decrease in new renters per new instruction indicates a noteworthy shift towards a more balanced landscape within the lettings market, as suggested by the agency’s analysis. This change is characterized by an increase in housing stock and a stabilizing trend in demand levels. The discernible drop in the number of renters per new instruction across London aligns with a broader trend, showcasing a normalization of market dynamics, particularly evident since July.
Despite this overall trend, certain regions within London exhibit distinctive patterns. South London, for instance, maintains relatively high figures with 24 renters per new instruction. This suggests that specific areas may experience localized variations in rental market dynamics, potentially influenced by unique factors shaping demand and supply. A similar trend is observed in West and East London, where the ratios of 23 and 22 renters per new instruction, respectively, further emphasize the nuanced nature of the rental market across different London neighborhoods.
The increase in housing stock, particularly in the latter part of 2023, has injected a positive momentum into the market. September and October, in particular, witnessed substantial increases, with stock levels rising by 29% and 37%, respectively, compared to the same period in the previous year. Even in December, there was a noteworthy uptick, recording a 22% increase over December 2022.
As a result, the cumulative stock throughout 2023 exhibited a 13% rise compared to 2022. This consistent trend of heightened housing supply is expected to persist into the initial months of 2024, potentially influencing market dynamics in the upcoming period.
Gareth Atkins, managing director of lettings, expresses the view that the London Lettings market in 2024 will revert to a more traditional pattern, resembling pre-2020 trends. Anticipating a seasonal rise in volumes during spring and summer, followed by a plateau in Q4, the market is expected to offer increased predictability for both renters and landlords, despite the looming General Election.
Sarah Tonkinson, managing director of Build to Rent, notes that as of the first month of 2024, the market exhibits a better balance compared to recent years. This marks a robust beginning to what is projected to be a pivotal year in the realm of London lettings.
In prime London, annual rental growth has decelerated to a 29-month low, standing at just 3.5%, although rents maintain a robust 29% increase compared to the 2017-19 pre-pandemic average. December witnessed a 2.8% annual rise in new letting instructions across prime London, while agreed lets saw an 11.7% decline over the same period.
On December 31, the available properties for rent increased by 60.4% compared to the previous year. However, it’s important to note that the 2022 figures are unusually low, as a significant number of properties were being let without being listed, not captured in this data. In comparison to the end of 2019, the currently available stock is over 30% lower. LonRes highlights St John’s Wood, Notting Hill, and Marylebone as three sub-markets performing above average, emphasizing the slow growth in new instructions and the increasing stock of properties to rent, growing by 60.4% over the year, albeit from a low base, as annual rental growth slows to 3.5%.
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