London and its rental market experienced a surging bounce-back in demand during the second half of 2021. This came largely as a result of the reopening of retail as well as a shift in focus towards indoor recreation and access to green spaces.
Are this demand and activity expected to strengthen in 2022? And what landscape will renters face when looking for a new home?
Let’s reflect on the London rental market while addressing the UK market overall, and dive into expert predictions for this new year!
Firstly, how are rents performing?
Average rental prices in the UK grew by 4.6% in the year to October 2021, as reported by Hometrack.
For London, average rents were still 5% lower than at the start of the pandemic but did rise by 4.7% in Q3 – taking prime London rents to a now average of £1,752.
Rents in London are expected to continue to grow throughout 2022 to catch up to leafier regions experiencing stronger rental growth due to mass home/hybrid work and the need to live among greenery, which has been observed over the last year and a half.
London rental market is back in record high demand
Near the end of 2021, demand and activity in London from renters reached its highest levels since the start of the pandemic! This signals a market rebound for London in 2022.
Overseas tenants are back with the reopening of international borders – mainly students. In addition to a whole new wave of tenants and buyers from Hong Kong moving to the UK with BNO visas.
Demand from international and UK buy-to-let investors is also slowly but surely rising and is expected to grow further as city offices reopen again, hopefully, this year.
From an investment perspective, why is 2022 a great time for buy-to-let in London?
- Tenants secure homes at a record pace due to rental supply being below the average for quite some time, which limits options and in turn pushes prices up. So unless a significant amount of rental stock enters the market in 2022, demand from renters will remain high and may excel.
- If you are a homeowner with a spare room or have the funds for additional property to let out in London, there’s an excellent opportunity to boost income.
- When also considering the government’s plans to raise the national minimum pension age from 55 to 57 from 2028, buy-to-let is a feasible option to increase savings for retirement. Due to this change, we expect more investors to be interested in entering the market soon.
And since rental prices are rising, there is little reason to worry about falling yields in the near future, based on expert predictions.
In addition, the employment market continues to exceed expectations with vacancies at a record high. This helps to maintain tenant affordability and demand for rental properties, with renting still seen by many as a solution to being “tied down” by ownership.
What’s more, the UK continues to attract MNCs (Shell is relocating its Netherlands headquarters to London this year!)which is expected to create thousands of new jobs, with employees who will need to rent locally.
Should I rent in London this year?
Historically, London is one of the priciest places to rent but has become more affordable as of late – pre-pandemic rates have yet to be met.
Yes, the supply of rental properties is low, but options should increase as more properties gradually enter the market. It’s worth asking a local estate agent for options, as they may have access to properties yet to be released to the market.
Shared accommodation is a great option if you’re open to it and want to pay less monthly compared to larger properties in high demand.
We promise that no question is too big or small!
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