Rent prices soar as demand surges in London’s real estate market

Rent prices soar as demand surges in London’s real estate market

Discover the reasons behind the soaring rent prices in London’s real estate market and find out what may lie ahead in the future in our latest blog.

July 31, 2023
2 min read

Recent times have not been particularly favourable for tenants, as rental prices in London have reached their highest point in the past decade according to Zoopla. But what has led to this surge in prices? The obvious answer lies in the high demand, while the supply remains significantly low. Let’s delve deeper into this reality.

Many individuals have returned to London after the COVID pandemic, with job vacancies, universities, and the art world attracting hundreds of thousands of people each year. Consequently, this influx of people is inevitably on the lookout for suitable properties or rooms that match their budgets. On the other hand, the availability of properties is still scarce. In the past five years, many landlords have sold more properties than they have purchased. This trend can be attributed to the fact that, before 2017, the interest on their mortgages was 100% deductible, resulting in a significant decline in their profits. Additionally, many landlords tend to offer long leases, which means fewer new properties enter the market each year. Moreover, some landlords have shifted to the short-term rental market (Airbnb, holiday lets, etc.) or have chosen to sell, capitalising on the increased property prices over the last decade according to the UK House Price Index. Furthermore, mortgage rates have also played a significant role, as landlords in need of remortgage have pushed prices up to ensure profitability.

One might argue that numerous new developments have been constructed over the last decade. However, the growth of London’s population has been immense. From 2013 to 2023, the population of London increased by a staggering 13.76%, with a whopping 1,234,000 more people now living in London since 2013. These numbers speak for themselves.

The question remains: how long will this trend persist? Answering this question is challenging. However, a potential decline in rates could lead to a halt in the soaring rent prices.