Recovery is on the cards for London’s rental market, according to estate agency Marsh & Parsons. Now all that festive fun is behind us, the firm reckons a wave of post-Christmas divorces and separations will jump start demand after a pretty underwhelming 2015.
Combined with tenants agreeing longer leases to seek security amongst the supply shortage (the average tenancy is now 23 months in London), and an uplift in corporate activity, the scene is set for a rental resurgence as families and single tenants battle it out amongst depleted registers.
The total supply of available rental properties across 2015 was 9% lower than in 2014, says the firm, while the demand was up 7%. As such, prime rents are expected to rise by 5% over the next 12 months, compared to the 1.9% seen in 2014, with mid-market two-beds in line for the biggest rises.
Patrick Littlemore, Director of Lettings at Marsh & Parsons: Come January, households will be picking up where they left off on big life decisions be this downsizing, starting a new job, relocating overseas or even separating and moving out of the marital home. All of these combine to give new impetus to the rental market at the very start of the year, and its a time when we experience some of our most zealous lettings activity. As tenant demand mushrooms in January, this initial activity will feed into stronger and more sustained rent growth throughout 2016 as a whole.
It is the lower price brackets of the private rented sector that have the biggest room to grow next year, especially in popular hot-spots such as Queens Park, lauded for retaining the style and atmosphere of Kensington with more affordable prices.
Two-year tenancy agreements have picked up traction over the past year and this momentum will continue to build through 2016. But with around half of such fixed term agreements containing some sort of rent increase, it’s not savings that’s driving their popularity, its stability. At a time when housing stock is in serious short supply, tenants are seeking out two-year contracts to give them peace of mind, and to put off the stress of searching for a new rental property.
The two-bedroom tier is enjoying a helping hand in the popularity stakes as a dearth of one-bedroom homes encourages tenants to trade up in size rather than luxury.
One-bed properties have always been perennially popular, but are not always the easiest property type to find on the market. The current low supply of one-bedroom properties is pushing up prices, and when faced with 550-650 weekly rental prices at the top end, London tenants are assessing their other options.
This will be welcome news for landlords owning two-bedroom buy-to-let properties, who have seen rents growth waver in recent years, and should spark much healthier rent growth in 2016.
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