London rents set to increase next year as supply diminishes

Rent increases seen in London this year are likely to continue in 2019 because of the diminishing supply of homes to let.

That’s the view of high-end lettings agency Chestertons, which says some pockets of the capital saw spectacular growth this year, fuelled by a reduction in supply as landlords quit the sector because of increased taxation and legislation.

Chiswick saw the highest surge in gross rental yields over the last year of around 30 per cent while Tower Bridge and Covent Garden saw an annual increase of 17 per cent and 15 per cent respectively.

Richard Davies, Chestertons’ head of residential lettings, warns that affordability is likely to be stretched further as rental growth outpaces most people’s wages. 

“There will be a limit though where people simply can’t afford to rent in London and landlords therefore need to be realistic with their rents” he warns.

However, he continues: “Despite many amateur landlords having to scale back their portfolios or leaving the sector altogether, investing in the London market is still a very attractive proposition for professional landlords with low interest rates, which is likely to continue, and higher rental returns. 

“Looking at a longer forecast, the supply and demand imbalance should be largely corrected by the rapidly expanding build-to-rent sector. 

“Against this backdrop, we are expecting to see a modest rental uplift next year of 2.5 per cent in London and 2.0 per cent in prime central London. We forecast that by 2022 we will see a total growth of 11.5 per cent in rents throughout London” he concludes.