Landlords forced to cut rents, as London continues to prove too expensive - 05/01/23

Landlords in London are facing an ever-growing rental battle, as the cost of living crisis continues to eat into any potential income. The capital is already hampered by extremely high rents, and with more people looking for their own personal space following the countries protracted covid restrictions, the city is struggling to justify its hefty rental price tags.

There has been increasing pressure on Landlords from rental agencies to cut their monthly rates, in a move that should enable more people to remain in the city. By the end of November, more than a third of landlords have made the difficult decision to cut rental prices, in a bid to avoid any voids as we reached the close of 2022.

According to Foxtons estate agents, the average weekly rent in the larger London market decreased from £568 to £551 between October and November. This 3% decrease means that landlords are now charging on average £68 less per month, a small but significant indication of the markets softening. On the other side of the bed, renters too have now reduced their personal rental budgets by around 2%, narrowing the number of options in London’s most crowded boroughs.

This move will cause further challenges for landlords, with many of the most desirable properties now falling outside of most renters’ monthly means. The cost of living crisis has put an effective ceiling on renters' finances, with landlord sat the top end of the market choosing to reduce rents by as much as 10%.

Data collected from Foxtons has indicated that the number renters registering inNovember for properties fell by 26%. When averaged across the city’s available properties, 15 renters are typically still competing for every new property. This figure may still be high when compared to the rest of country, but actually represents a 31% drop since the end of October.

Analysts have suggested that the market is likely to continue this decline, as more people working from home expect to have access to more internal space, along with a small garden. This has motivated many to look to the north of the country, in a bid to get into the fast-growing Northwest property market. Liverpool in particular has become one of the country’s fastest growing rental markets during2022, with many renters seeing the benefit of both larger on average property sizes and a vibrant city offering a wide variety of shopping and dining destinations.

With London continuing to prove difficult for most renters, returns for investors in the capital may grow even more elusive.