London’s property market has witnessed a substantial change in recent months, with an increasing number of homeowners choosing to let their properties rather than selling them at current market conditions. Nationwide estate and lettings agent Knight Frank, have today released information that indicates that the number of lettings instructions in July 2023 in London was 18% higher than in July 2022, marking the highest volume for any single month since October 2020.
More London Home Owners Are Choosing To Let Their Properties
According to Knight Frank, the main element causing this interesting trend is the uncertainty in the sales market now, as homeowners grapple with the challenge of selling their properties at desired prices. The recent rise in mortgage rates, prompted by the Bank of England’s efforts to combat surging inflation, has also resulted in downward pressure on property prices and sales volumes.
David Mumby, Regional Partner at Knight Frank, has commented on this new data, saying:
“We are starting to see a noticeable shift in stock from the sales markets to the lettings market as owners are not able to sell for the asking price. A strong sales market in Notting Hill and Kensington meant they were the last two areas holding out, but we are now seeing it happening there too.”
Rents Are Still Going Up Due To Strong Demand
Despite some of the property stock changing from lettings to successful sales, the majority of homeowners are opting to let their properties, leading to an influx of available rental properties. The surge in supply, however, has yet to significantly impact rental prices due to strong demand. Meaning the struggles being felt by renters whose rent has increased significantly in recent months is still continuing, with some extreme cases seeing rent increase by as much as £300 a month. However, according to Knight Frank, average rents in prime central London have experienced a growth of 13.7% over the past year, a significant drop from a 30% increase that we saw during the height of the rental property shortage in April 2022.
According to the research by Knight Frank, prime outer London has seen an increase in rental prices by 12% in the year leading up to July 2023. Although the higher supply of rental properties has not yet substantially affected rental prices, experts predict that this increased availability may influence rents in the upcoming months.
Jon Reynolds, the Head of North and East London Lettings at Knight Frank also comments on this, emphasising the strong demand in the rental market. He says:
“Demand is so strong right now that higher supply hasn’t notably affected rents yet. I would expect it to feed through to a greater extent over the next six months.”
As the uncertainty surrounding the sales market continues and mortgage rates continue to rise, the buy-to-let sector looks like it could see a complete revitalisation. Those who currently own rental properties or those looking to become landlords could start to see things picking up in the coming months and years. Homeowners are recognising the advantages of renting out their properties in a market where selling might not actually be the right choice if you are looking to make a profit. With strong rental demand and an expectation that rates will start to come down, the buy-to-let sector can potentially offer a stable income stream for property owners.
Speak To a Mortgage Broker For Advice on Rental Properties
If you own a property already and are considering renting it out, then please feel free to get in touch with one of our brokers here at Oportfolio. We will be able to give you help and guidance along the way and make sure that you are getting the most out of your property. Call or send us an email to get the ball rolling. We are here to help.