News: Rent recovery in London may kick-start capital sales market too

Thu, 22 Jul 21

Rapidly rising rents may trigger a new wave of investment buyers in London, helping to resuscitate the capital’s sales market in the process.

That’s the view of the Home property website, which has issued its latest market snapshot. 

It says the recovery of the rental market in London brings with it a reaffirmation of fundamental value, namely in the form of yield. “This key shift will attract the attention of investors who have been hitherto wary since the [Covid] outbreak, but bargains are to be had right now in the capital region and the prospect for future capital gains is huge.”

The site says the London sales market was primed for recovery at the beginning of the Covid outbreak after several years of sideways price action. It is therefore arguable that a return to the growth part of the property cycle is now well overdue and rapidly rising rents - amid highly favourable lending conditions - looks to be the green light that the market has been waiting for.

Annualised growth in asking rents in Greater London has now moved into positive territory for the first time since the pandemic began (up 1.3 per cent) and all boroughs without exception show rent rises over the last three months. 

The largest rises in asking rents over just the last six months are in the City (up 36.0 per cent), Kensington and Chelsea (surging 20.0 per cent), Westminster (up 17.7 per cent) and Wandsworth (rising 16.7 per cent).

Outside of London, scarcity continues to push up rents. 



It says the low number of properties for sale across the country - down 32 per cent compared with June 2019 - may be because with a vibrant lettings market, fewer sellers want to forego rental income. 

“Double-digit rent rises and low void times are clearly an attractive alternative to selling a safe asset in uncertain times” says Home.

“A marked reduction in supply of rental properties now persists in all English regions, Scotland and Wales, thereby supporting the recent record hikes outside of London. However, rent rises in the regions are slowing as some demand now shifts back towards central London.”

The largest annualised average rent hikes remain in the East of England (up 11.0 per cent) and the South West (up 14.6 per cent).

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