Read our Q3 2024 Lettings Report, showing stabilising values on re-lets, but with rental growth continuing above the rate of inflation over the year to date.
LCP Private Office issues its Q2 2024 lettings report showing stabilising values on re-lets, but with rental growth continuing above the rate of inflation over the year to date.
Average agreed rents on re-lets in Q3 fell marginally by -0.15%, the first negative growth seen in the last 3 years since Q3 2021. It is worth noting that these lets are likely to have been previously agreed during the period of unprecedented growth in the aftermath of the pandemic and mini budget. Rental values in PCL have been stabilising over the last year, with much more modest growth over the course of 2024 (4.19%) since the 20.75% peak of 2023.
Rents agreed on renewals are still increasing, with average growth of 7.35% in Q3 2024, remaining consistent over the course of 2024. Renewed rents have continually increased year on year since 2021, when they fell -2.1%, largely due to the effects of the pandemic. This demonstrates the ongoing lack of supply in the PCL rental market, resulting in many tenants choosing to extend their current leases at a higher rent, rather than re-entering the highly competitive rental market.
The average length of tenancy has reached an all-time peak of 31.9 months for the year-to-date, which further demonstrates that renters are typically choosing to extend their leases. Tenancy durations have been increasing steadily over the last 10 years and are now more than double the 15.9 month average tenancy length in 2015, largely due to the ongoing supply and demand imbalance and highly competitive market conditions.
The average time taken to let a vacant property in LCP’s managed portfolio during Q3 2024 was 16.9 days, which although an increase on Q2, remains significantly lower than the 43.9 day average seen during the typically slower rental market in Q1. Short vacant periods further reflect the lack rental supply, with new properties being snapped up in the seasonally busy student season by eager renters with often limited choices.
Central London continues to have a diverse and integrated feel to its inhabitants, with the largest proportion of LCP’s new tenants in Q3 from the EU (29%), followed by UK domestic tenants at 21%. However, we also saw an increase in the number of tenants from the Middle East which is likely reflective of the increase in students coming to study at London’s world class universities.
Q3 saw a variety of occupations amongst new tenants. The financial sector continued to represent the highest proportion at 38%, with tech workers increasing to a 17% share, demonstrating a correlation between the high salaries associated with these industries and the high rental values in PCL. As expected, a significant portion of new tenants in Q3 were students (17%), ahead of the start of the new academic year.
Liam Monaghan, Managing Director of LCP Private Office, comments on the market
We are continuing to see strength in the rental market in Central London, with the key metrics of our report showing the trend of increasing rents since the pandemic, with short vacant periods, longer tenancies and above inflation increases upon renewal of a tenancy.
High rents on renewals have encouraged tenants to look towards the sales market, apparent by a recent spike in LCP tenants contacting us to assist with the search for their first property in London, as they look to replace the BTL investors who are hesitant about increasing their portfolios following the recent change in Government.
With the final push towards the implementation of the Renter Reform Bill, it is vital for Landlords to hand select their tenants with care, ensuring that they are suitably vetted and verified at the start and throughout their tenancy. Whilst there are nerves surrounding the Bill, providing the correct level of care and attention is taken, Central London should continue to be a safe and secure long-term investment for property owners.
Prime Central London landlords must continue to be vigilant for further challenges that may lie ahead, particularly with the upcoming Autumn Budget. With the additional regulation and taxation likely to be introduced, LCP will continue to provide ongoing support and guidance to our BTL investors to help them navigate any new hurdles that arise.
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