The London rental market remains dynamic as we enter Q4 of 2024. According to the latest Zoopla Q3 2024 report, annual rent inflation across the UK sits at 5.4%, with an average of 21 enquiries per rental listing - still double pre-pandemic levels.
However, London has been leading the way in slowing rental inflation, with the city's rate dropping from 12.2% in 2023 to 2.5% in 2024.
Key Drivers of the Market
One of the primary causes of the current market trends is a severe drop in the number of available rental properties. Across England and Wales, the rental stock is down 24% since 2019, with London seeing a similar 25% reduction.
This has led to significant competition among renters, though affordability concerns have tempered rental price hikes in the capital.
Rocket's Experience
Here at Rocket, we've seen first-hand how this rental squeeze has played out. During the summer of 2024, we were still able to push rents slightly higher for properties that weren't already over-rented.
Many of our properties saw modest increases between 2.5% and 5%, aligning closely with Zoopla's projections. With that being said, affordability is becoming a pressing issue, with tenants growing more sensitive to price increases.
The Current Market: Affordability and Price Sensitivity
As we move into October, we've noticed a marked shift in the market. Properties we expected to rent quickly are sitting on the market longer than anticipated.
The market has become extremely price-sensitive, particularly for properties that are not priced competitively.
This trend is likely to continue through the end of the year, especially with affordability pressures continuing to shape tenant behaviour. The rental market is expected to remain challenging from now until January, and landlords who price their properties competitively will see the most success.
Outlook for Early 2025
Looking ahead, January typically brings renewed demand as overseas tenants relocate to London for new jobs. While we expect a slow down over the winter, the market is likely to pick up in the new year.
We predict rental prices will see moderate growth through early 2025, particularly as wage increases - such as the recent public sector pay rises - start to feed through into the wider economy.
The Impact of the Renters Rights Bill
Another factor shaping the future of the rental market is the Renters Rights Bill, expected to be implemented by summer 2025.
This legislation will eliminate fixed-term tenancies, forcing landlords to offer month-to-month arrangements. Though this change will disrupt the common practice of securing summer-to-summer tenancies, Rocket remains committed to helping landlords navigate the new regulatory environment.
And it’s not all bad news, as landlords will retain the ability to raise rents annually using a Section 13 notice, which will be key to keeping up with rising costs.
Rocket’s Advice: Price Competitively for the Best Results
Our advice to landlords is clear: in the current market, pricing competitively is essential.
Given the affordability pressures facing tenants, properties need to be positioned to attract interest without overpricing.Taking advantage of peak seasons like January or summer to adjust rents and secure long-term tenants is a smart strategy, but for now, competitive pricing is the key to reducing void periods and maximising rental income.
If you have questions about how these trends may affect your property portfolio, or if you're looking for guidance on setting the right rental price, feel free to reach out to Rocket Property Management for expert advice.
