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Rental Prices in London: Data, Analysis, and Projections

Rental Prices in London: Data, Analysis, Comments and Projections

(last updated 6 April 2023)

Introduction

Simply London is one of the largest relocation agents in London and our core business is finding rental accommodation for our overseas clients moving to London. That means we look at over 10,000 London rental properties a year when serving our clients, and see a huge amount of data, all of which gives us a good insight into what’s happening to rental prices in London.

There are lots of property-related businesses who have similar oversight of the London rental market, but the key difference between us and the others is that we are genuinely impartial on the level of London rents. We have no vested interest in talking the market up or down, which hopefully makes our observations that bit more useful.

2022 saw rents in London reach record highs and the supply of property reach all-time lows. There was a huge amount of public debate about the plight of renters in London and the UK; countless hypothesis as to the causes; and projections as to when the crisis might end. Some of it we agreed with, but a lot of it we didn’t.

So we decided to make our London rents information and thoughts available to you including the data we receive and our general market observations.

Below you will find a mixture of our Monthly Average London Rents based on observing rental prices on the main property platforms; our Ad Hoc Rent Observations based largely on the contents of our team discussions, and our London Rent Predictions Blog – whether we think rents are headed up or down and why!

Your comments and thoughts are very welcome. Please email londonrents@simplylondonrelocation.com – we love a good discussion!

Monthly Average London Rents – March 2023

  • In March 2023, the average* price of a 1 bedroom property in London was: £1,721
  • In March 2023, the average* price of a 2 bedroom property in London was: £2,495
  • In March 2023, the average* price of a 3 bedroom property in London was: £3,353

You can find the prices for January and February 2023 at the bottom of this article, and below a chart showing the evolution over the last 12 months:

1 bedroom flat and house in London:

2 bedroom flat and house in London:

3 bedroom flat and house in London:

*average found in the main UK online property platforms, across all areas of London.

London Rent prediction – March 2023 onwards

At the beginning of March 2023 Guy Gittins, Chief Executive of Foxtons, one of the largest estate agents in London, said that he expected lettings to remain resilient in 2023, with demand for rental properties expected to continue to outstrip supply over the near term. He also said that people struggling to afford London rents will have to move out of the capital, or compromise on the property type or location. Rightmove, one of the main property platforms in the UK, made a similar observation – that tenants are leaving city centres because of rising rents.

 

This is currently pretty standard London rental market commentary – things won’t be as bad as last year, but still won’t be great if you are a tenant. ‘Skyrocketing rents, job-style interviews and dangerous housing: inside the capital’s renting hell’ was the title of an article dated 20 March in the Evening Standard which even allowing for a bit of journalistic drama definitely reflects the current sentiment in the London rental market.

Some commentators do however venture as far as to say that 2023 may be more challenging than 2022 for London landlords due to the highly uncertain macroeconomic backdrop, and this is where things could get interesting for tenants looking to rent in London soon.

So could things change materially in the London rental market?

Let’s start with a recap: at the start of last year (2022) we had low bank interest rates; a strong housing market; and employers fighting for employees.

At the start of this year (2023) we have a sagging housing market; high inflation; much higher interest rates; redundancies and unstable banks – note the recent collapse of Silicon Valley Bank, Signature Bank and Credit Suisse.

Against this backdrop, we think it’s reasonable to think something is likely to change. Is it possible we could be coming to the end of a near 30 year global house price and construction boom? A boom propped up in the last 15 years primarily by cheap money, but also in the UK by the government’s “Help to Buy” Scheme, developers’ shared ownership schemes and ‘Bank of Mum and Dad’ – a recent UK phenomenon where it has become common for parents to lend their children money for the deposit on their first house.

How would the end of the housing / construction boom affect London rents?

Rents in London rose rapidly last year because of high demand and a short supply of available rental properties. An end to the construction boom, accompanied by a weaker economy generally would reverse both of these drivers.

High demand has been driven by a relatively strong economy and the associated high levels of employment attracting people to London from the UK and abroad. A weaker economy will reduce this pull whilst also forcing existing London tenants to use property more efficiently to save money –

  • flatsharing more
  • moving home to parents
  • and shrinking the space they occupy by not having spare rooms

This change in tenant habits is likely to mean 2+ bed properties will be in higher demand than 1 beds as people share / rent second bedrooms to help pay the mortgage / rent.

Supply shortages have been driven by both property owners and tenants using property inefficiently while they feel secure in their jobs and confident about their finances. A weaker economy, job insecurity and falling property values will force owners to rent out property that –

  • had previously been left empty;
  • had been used as an occasional second home; and
  • owners had wanted to sell but failed to do so – something we see a lot when looking for rental properties in London for our clients!

This will happen at a time when there are also a number of large residential development projects in London reaching completion, further increasing supply.

So what is the conclusion? Are London rents going to rise or fall this in 2023?

If and when it happens, we think the end to the housing / construction boom will cause London rents to fall, not just because of a reversal of the demand / supply drivers, but also because of the imbalances that have built up in the housing market over the past 30 years – not least the concentration of property ownership in relatively few hands following the ‘buy to let’ boom.

As to 2023, we see for now a very slight decrease in rental prices compared to 2022, but so far not one that would signify a dramatic change in the rental market for tenants.

What are our recommendations for tenants looking to rent in London this year?

Whilst we don’t have a crystal ball, and cannot predict the future, our recommendation is twofold:

  • You could decide not to commit to a massively long tenancy with no way out of it until the end of its term, in case prices do end up falling even more. Beware however, the downside is that the landlord has the ability to increase the rent at the end of the lease term (if and when you decide that you want to renew your lease), so this could backfire if rental prices end up going up rather than down. You have to decide how much risk you want to take. In our world, a long tenancy is pretty much anything above 12 months.
  • Secure a property before the summer 2023 if you can – each year, summers are the busiest periods and we see sharp rises in rental prices due to this seasonality – we don’t foresee 2023 to be any different this time.

The Estate Agent “crane count” by Simply London

Our Estate Agent Count is similar to the ‘crane count’ ( https://econlife.com/2019/03/cranes-as-economic-indicators/ ) economists use. It’s a measure of how much effort estate agents are making to promote their rental properties to us.

During the summer 2022 it measured zero because they had to make no effort at all – we were chasing them for every property we could get our hands on, whilst we were receiving zero message from estate agents to advertise properties, even the most expensive ones.

Our ‘Estate Agent Count’ is at 4 (on a scale of 1 to 10) in March 2023.

——- End of latest Entry ——

Monthly Update – London Rents – February 2023

Average Rents in London –

  • 1 bedroom flat: £1,700 / month
  • 2 bedroom flat: £2,400 / month
  • 3 bedroom flat: £3,300 / month

London rents for 1, 2 and 3 bed flats rose slightly last month but are still well below the peak in September 2022.

The average London rental price for all apartment sizes stands at £2,467 / month.

The number of 1, 2 and 3 bed properties available for rent in London fell slightly in February 2023 compared to January 2023.

Our ‘Estate Agent Count’ is at 5 (on a scale of 1 to 10) in February 2023.

In general there is still a reasonable level of competition for each apartment, but the days of estate agents being able to insist on open houses appear to be coming to an end. Private viewings have now returned in a sign that landlords are having to work harder to secure the tenants they want. The days of multiple offers for properties also seem to be subsiding and slightly less desirable tenants (e.g with pets) are being accepted more readily than in the past few months.

Monthly Update – London Rents – January 2023

Average Rents in London –

  • 1 bedroom flat: £1,700 / month
  • 2 bedroom flat: £2,350 / month
  • 3 bedroom flat: £3,190 / month

London rents for 1, 2 and 3 bed apartments were broadly flat last month but are still well below the peak in September 2022.

The average London rental price for all flat sizes stands at £2,413 / month.

The number of 1, 2 and 3 bed properties available for rent in London rose in January 2023 compared to December 2022.

Our ‘Estate Agent Count’ is at 5 (on a scale of 1 to 10) in January 2023.

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