Prime London Rents Rise as Landlords Adjust to New Legislation

The Renter’s Right Act is still proving largely counterproductive.

The law, which came into effect in May, introduced a series of safeguards for tenants but rents have been pushed higher.

One reason is a shortage of supply as more landlords have sold due to the prospect of tighter margins and increased red tape.

The number of new rental listings in prime central and prime outer London was 14% below the five-year average in the first six months of this year, Rightmove data shows.

The Act sets stricter rules around collecting and increasing rent, reforms the possession process and introduces safeguards to prevent properties being re-let after they have been recovered for sale.

The prospect of Minimum Energy Efficiency Standards, which mean rental properties will require an EPC C rating from 2030, has been another deterrent.

Asking Rents Rise

With landlords prevented from accepting offers above the asking rent, advertised rents are rising.

“Without competitive bidding, some landlords are taking a more confident approach to pricing,” said Mel Constantinou, head of lettings in south-west London and the Home Counties at Knight Frank. “Whether tenants are prepared to meet higher asking rents depends on how tight supply is in the local area. As the market adjusts to the new rules, setting the right asking rent from the outset will become increasingly important.”

Average rents in prime outer London (POL) rose 3.2% in the year to July, Knight Frank data shows. That followed an increase of 1.2% over the previous three months.

The last annual decline was recorded five years ago during the pandemic and rents in POL are 36% higher than they were before Covid.

Another example of how the new legislation is making life harder for both tenants and landlords happens in locations popular with international students like King’s Cross. 

“International students used to be able to pay a year’s rent upfront,” said Jon Reynolds, head of lettings in the north, city and east London region at Knight Frank. “Landlords liked it because of the security it gave them,” he said. 

Modest Upwards Pressure

Supply is also tight in sub-£1,000/week markets in prime central London, which should keep modest upwards pressure on rents this year, said David Mumby, head of prime central London lettings at Knight Frank.

Average rents in PCL increased by 1.1% in the year to July, Knight Frank data shows. It means rents in PCL have also been increasing on an annual basis for five years and are currently 37% higher than before the pandemic.

The results of government intervention are also being felt at the higher end of the lettings market in PCL, where supply has been boosted by owners unprepared to sell while a less favourable tax landscape puts downwards pressure on prices. 

New rental listings above £1,000 per week in London were 19% higher than the five-year average in the first half of this year, Rightmove data shows.

While average rents in PCL below £1,500 per week rose by 1.9% in the year to July, they were flat above that level.