Lettings Market - Change clearly on the way, says Knight Frank

The supply of lettings property is finally increasing says Knight Frank.

The agency says that in London and elsewhere, mortgage rates and the accompanying downwards pressure on sale prices means more owners are weighing up their options, which include letting out their property.

In the first three weeks of January, the number of new lettings instructions in London was 10 per cent higher than the equivalent period last year, Knight Frank data shows.

As supply picks up, more tenants are exploring their options rather than renewing their tenancy agreement, particularly when it involves a rent increase. That, in turn, will increase supply further.

Average rental values in prime central London are 24 per cent higher than their pre-pandemic levels. The equivalent rise in prime outer London is 22 per cent, underlining the extent of the increase some tenants have faced.

Despite the growth, demand remains as strong as ever. The number of new prospective tenants registering the final quarter of 2022 was 30 per cent above the five-year average.

So while the agency expects upwards pressure on rents to relent as supply picks up from a low base, rental value growth won’t go into reverse,  it insists.

The fact the sales market in prime London postcodes has begun the year more strongly than expected may also reduce downwards pressure on rents by keeping the supply of new rental property in check.

“We are not overrun with new supply, but a change is clearly on the way” says Gary Hall, head of lettings at Knight Frank. 

“We are at the stage when tenants are doing more viewings and starting to shop around. Six months ago, the norm was a single viewing followed by quick decision about whether to take the property.”

As a result of fast-rising rents and slow-rising prices, average gross yields have increased. 

The figure was 3.8 per cent across all London in January.