Read below our overview of the PCL Lettings market in 2024, highlighting stabilising rental values, the longest tenancies we have seen to date and shorter vacant periods.
LCP Private Office issues its review of the Prime Central London lettings market in 2024, showing stabilising rental values, the longest tenancies we have seen to date and shorter vacant periods.
Average agreed rents on new tenancies within our rental portfolio increased by 3.65% in Q4 2024, reflecting the modest rental growth seen over the course of the year (3.13%) and in line with inflation. Rental growth in 2024 was more broadly akin to the levels seen in 2019 (2.14%), the last pre-Covid year reflecting ‘normal’ market conditions before values spiked with an unprecedented 19.46% growth in 2022.
Rents agreed on renewals in Q4 2024 saw average growth of 4.7%, a decrease on the previous quarters when growth averaged 7.6% showing signs of the market stabilising. Rents on renewals increased by 6.9% on average over the year, a reduction on the 8% growth in 2023, reflecting the levelling out of the rental market in 2024 and reduced inflation, giving tenants more negotiating power.
The average length of tenancy reached an all-time peak of 26.8 months in 2024. Competitive market conditions and the ongoing supply and demand imbalance led tenants to either extend their current tenancies and stay put at a higher rent, or offer landlords a longer tenancy to secure a property. Whether these levels will be sustained in 2025 is yet to be seen and will be impacted by the level of supply in the market.
In 2024, the average time taken to let a vacant property in LCP’s managed portfolio was at its lowest in Q4, at just 6.14 days. Over the year, the average time a property stood vacant was 22.2 days, which is less than 2023 (25 days), as well as the pre-Covid yearly average of 27.3 days, further demonstrating the highly competitive rental market last year and the ongoing lack of supply.
The nationality of new tenants from UK and EU totalled 63% in 2024, a marginal 2% increase on last year. Of that, tenants from the EU continued to represent the largest portion at 38%. Outside of the UK and EU, the largest number of new tenants were from Asia-Pacific at 12%, a 3% decrease on 2023. We saw a slight increase in the proportion of tenants from North America, a trend we expect will continue in 2025 following increased demand from US clients last year.
We saw a diverse range of occupations amongst new tenants in 2024. The financial sector continued to represent the highest proportion at 36%, a 3% increase from this sector last year. The proportion of HNW students however was 13% less than in 2023, likely due to the higher volume of students retaining their rental properties to ensure they have accommodation which is historically sparse at the start of the academic year.
Liam Monaghan, Managing Director of LCP Private Office, comments on the market
We saw a gradual correction in the PCL rental market in 2024, with rents on re-lets stabilising to levels last seen in a ‘normal’ pre-Covid market, following the period of unprecedented demand that followed the pandemic. Competitive market conditions and the ongoing supply and demand imbalance led to tenancies reaching 26.8 months on average, the highest in LCP’s records.
We wait to see how the introduction of the additional 2% SDLT surcharge and the Renters Reform Bill, now in its Third Reading in the Commons and expected to become law in the spring, will impact the PCL rental market this year. Whilst we have seen values stabilise over 2024, the new legislation could unintentionally push rents higher by decreasing supply. Whilst there are nerves surrounding the Bill, providing the correct level of care and attention is taken when buying and refurbishing property, alongside selecting tenants, Central London property should continue to be a safe and secure long-term asset for BTL investors.
UK Finance reported recently that the Buy to let mortgage market showed ‘greater than previously expected resilience in 2024 as cost and rate pressures began to recede’. Whilst mortgage rates have started to move in the right direction, with some lenders announcing reductions in their BTL products in January, further reductions are needed to make a significant positive impact on this sector.
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