Apartment prices are plummeting in London as the slowdown continues in the capital’s property market, but rental costs are rising as more and more Londoners looking for rented homes.
Official figures released today show the cost of a flat has fallen across England by 0.6% over the past year. A steeper fall of 2.6% in the capital amounts to a drop of more than £10,000 in a year.
But the latest data from the Office for National Statistics (ONS) also shows the cost of renting in the capital has begun to tick upwards. The average rented home is now up 0.2% on a year ago when it was up just 0.1% last month, and was 1.1% higher across the UK.
Some property industry experts believe rents could soon start rising faster, bringing to an end a period of slower growth since 2016.
More tenants hunting for homes
Rising prices are likely to reflect rising demand. Recent figures from the Royal Institution of Chartered Surveyors (RICS) and the Association of Residential Letting Agents (ARLA), both show increased demand from potential renters since the start of 2019.
Officials say such changes can take time to filter through into statistics for rental prices overall, which means more price hikes in London’s rental market could be on the way.
Allan Fuller, of Allan Fuller Estate Agents in Putney, said: “It is noticeable that younger tenants have little or no interest in buying even though mortgage payments would often be less than rents.
“Demand is outstripping supply in the lower price ranges,” he told the RICS in its latest survey.
James Gubbins, of Dauntons estate agents in Pimlico, added: “Tenant demand is high and rents are starting to increase. Landlords are selling up, reducing stock levels.”
Landlords ‘leaving the market’
ARLA figures show a rise in tenants facing rent hikes nationwide in January, with the highest number of letting agents reporting increases since September 2018.
The association says rent increases also reflect a less favourable climate for landlords, which is hitting the number of rental properties available on the market. A new law is set to come into effect in June banning letting fees and capping several other charges, but letting agents warn costs may still be passed on in higher rents.
David Cox, chief executive of ARLA, said in its latest report: “With demand increasing by 46% from December, and rents starting to rise in response to all of the cost increases landlords have experienced over the last few years, tenants are in for a rough ride.
“Last month, there were three landlords selling their buy-to-let properties per branch, and as landlords continue to exit the market, rent prices will only continue to rise.”
Ownership out of reach for many
Apartment prices may have dropped in the capital, but the average flat still sold for £415,000 in January.
Daniel Tomlinson, an analyst at the Resolution Foundation think tank, suggested house prices in London were still so high that recent falls may not significantly help the average buyer.
He tweeted: “ House price growth has slowed recently but increases in house prices have still substantially outpaced increases in earnings since 2011. This yawning gap between house prices and earnings is largest in London, and has only closed very slightly recently as house price growth in the capital has stalled.”