Market Update 2024
Rental Growth and Demand
The year saw a stabilisation in rental growth within prime London areas. Average rents increased by approximately 1.5% over the year, with the latter half maintaining this steady rate. This moderation follows a significant surge of around 20% since early 2021, indicating that affordability ceilings are being approached in certain locales. Notably, areas like Wapping and Islington outperformed, with rental growth for houses exceeding 2%. Conversely, prime central locations, spanning from Kensington to the City of London, experienced a slight decline of 1% in house rents by year-end, though they remain substantially higher than the early 2021 market low.
Supply Dynamics
The imbalance between tenant demand and available rental properties began to ease in 2024. Data indicates a 3% increase in new listings across prime central and outer London, contributing to a more balanced market. This shift has led to heightened price sensitivity among renters, especially in the sub-£1,000 per week segment, where increased supply and reduced renewal rates have exerted downward pressure on rents. In the mid-range (£1,000 - £3,000 per week), traditionally dominated by corporate tenants, demand has been tepid, extending the average time on the market to approximately 80 days—a 12% increase. In contrast, the premium segment (over £4,000 per week) has demonstrated resilience, with several high-value lettings secured promptly upon listing.
Legislative and Economic Influences
The introduction of the Renters' Rights Bill in September 2024 has been a pivotal development. Aimed at enhancing tenant protections, the bill proposes the abolition of "assured shorthold tenancies," imposes stricter eviction protocols, and seeks to curb rental bidding wars. While these measures are designed to bolster tenant rights, there is concern that they may inadvertently prompt some landlords to exit the market, potentially constricting supply and exerting upward pressure on rents.
Economic factors have also played a role. The Bank of England's monetary policy adjustments, including anticipated rate cuts, have influenced borrowing costs. While these cuts aim to stimulate the housing market, their impact on the rental sector remains nuanced, as potential buyers may opt to remain in the rental market longer, sustaining demand.
In summary, London's Zone 1 rental landscape in 2024 has been characterised by a return to more predictable patterns, with stabilised rental growth and a gradual rebalancing of supply and demand. However, ongoing legislative reforms and economic shifts continue to shape the market's trajectory.
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