Tenancy renewals shoot up as renters delay decisions to buy

A lettings agency dealing primarily with Prime Central London is reporting that tenancy renewal volumes are shooting upwards as renters stay put and wait to see what happens in the sales sector.

Some 51 per cent of JLL’s deals agreed in Q2 2023 were renewals, up from 45 per cent a year ago and 24 per cent as recently as Q2 2021. 

The number of new lets rose this quarter compared with last, up 13 per cent. 

This quarter the JLL PCL index saw rents rise by 1.9 per cent over the three month period, with rents 5.4 per cent higher than they were at the same point a year ago.

Small flats saw the highest annual increase in rents at 6.7 per cent whereas more expensive properties (3,000 per week or more) saw a more modest 2.9 per cent annual increase.

Rents are now 26 per cent higher for one-bedroom flats than they were three years ago at the end of Q2 2020.

For prospective tenants having to contend with low stock levels there appears to be some respite. Stock levels are starting to increase, albeit off a low base. 

The number of rental properties listed to let at the end of Q2 2023 was up 13.8 per cent on the same point in 2022. But volumes remain 55 per cent down on levels we were seeing pre-pandemic in Q2 2019.

Director of UK residential research at JLL, Marcus Dixon, explains: “The implications of stubborn inflation on the UK mortgage market are hampering activity in prime central London. While fewer buyers are heavily indebted - almost half buy cash - uncertainty surrounding the short-term outlook is impacting prices.

"The lettings market remains competitive, stock levels have improved on their 2022 lows but there are still more prospective tenants than there are properties. This has resulted in further rent increases this quarter, with rents almost 20 per cent higher than they were in 2020.

“The lower end of the rental market continues to see a steady stream of (formerly) prospective buyers moving across into lettings. With smaller properties, mainly one- and two-bedroom flats, recording the highest annual increase in rents, while prices for similar properties are seeing more significant falls than homes in more expensive price bands.”