Rising costs, slowing tenant demand soften lettings market in central London

Investors’ fortunes in the lettings market in central London is looking south as rising costs and slowing tenant demand are forcing both landlords and tenants out of this part of the city to the suburbs.

A new report by National Landlords Association (NLA) reveals that the number of landlords reporting a rise in tenant demand in the fourth quarter of 2016 fell by almost 30 percent points when compared to the same quarter in 2015, down to 17 percent from 45 percent.

Conversely, the report also shows that 40 percent of landlords in the South East reported a rise in tenant demand in the quarter, the highest reported across the UK, which the NLA says indicates that tenants are increasingly looking to move out of central London to more affordable suburbs.

It also points out that the perceived drop in rental demand in central London coincides with a more conservative approach from landlords to purchasing property in the capital in the coming months such that only 5 percent of landlords who operate in London say they plan to purchase more properties in the next quarter, the lowest across all regions and down from 15 percent from a year ago.

Every Investor, an online investment guide platform, notes however, that the proportion of landlords operating in the North East who plan to buy in the next three months has almost doubled, up from 10 percent in the final quarter of 2015 to 19 percent in the fourth quarter of 2016.

The proportion of landlords in Yorkshire looking to buy, according to the platform,  has also jumped significantly from 10 percent in the fourth quarter of 2015 to 16 percent in the same quarter of 2016.

“It looks like central London is simply becoming too expensive for most people, regardless of whether you want to buy, invest or rent”, said Carolyn Uphill, chairman of the NLA in the report.

Uphill pointed out that  for many tenants, the practical solution of moving out of the city to more affordable suburbs with good transport links is becoming increasingly appealing.

“In turn, it seems that landlords have been quick to respond, turning their backs on the capital and looking to other areas where the upfront cost of acquiring property is lower, and the potential yields to be had are higher”,  she added.