London Lettings Sees Big Supply Surge – What Next for Landlords and Tenants?

June brought a surprise to the London lettings market… and for once, it is not another doom-and-gloom headline!

New rental listings shot up to close to 45,000 across the capital. It is the highest level in four years and marked a whopping 18% increase from May.

It’s a big shift – particularly following years of low stock, which has been in a large part responsible for the frenzied competition and realistically has led to eye-watering rent hikes. But with this many new listings, could it be that the tide may finally be turning?

Before we all start cheering – or panicking, depending on which side of the fence you sit – let’s take a little dig into what it actually means for you, and especially if you’re a tenant or landlord in places around here in the south-west of the city, like Streatham, Balham, Tooting, Wimbledon and Colliers Wood – places that sometimes fly a little under the radar, but where the lettings scene can feel just as fast-paced as Zone 1.

More Properties from London Landlords, More Choice for London Tenants

According to the latest market data, new applicant registrations – tenants actively searching and signing up with agents – rose 21% month-on-month in June. Demand is still high therefore, but do these signs not suggest that supply is catching up at last?

If so, it could mean that tenants are starting to have options again. When tenants have choice, of course, it puts a little more pressure on landlords to compete – not solely on price, but also on presentation, and indeed on professionalism.

At Your Home Managed, we’ve definitely seen this play out. Properties that were going under offer within 24 hours earlier this year are now staying on the market for a few days, perhaps closer to a week, before being agreed. It’s not a downturn – four or five days is hardly slow! But it could represent a little rebalancing of what had become a somewhat unstable lettings market that, whether we liked it or not, felt weighted against tenants – certainly when it came to competing for accommodation.

Rents Are Still Rising (But Are Set To Slow Down)

Rents are still going up. The ONS reports 7% annual growth in the UK rental market, and here in London that figure is reported as being 7.3%. That is hardly small change. Nevertheless, predictions from economists are that rents will start to drop to something closer to 3% annually – much more aligned with inflation.

That being said, right now the average rent here in the capital when split weekly now sits around £593 – a slight increase of 1% since May.

Here in Southwest London, we are still seeing strong rental prices for quality homes. But the pace of growth is already slowing. Tenants are pushing back more than they were six months ago. They recognise already that they’ve got a bit more wiggle room, and they’re using it.

And who can blame them? If you are a landlord and you want to maximise your rent, the best way to do it is by providing quality, well presented accommodation that tenants feel excited about living in.

That’s why landlords can’t just coast. If your property hasn’t had any love since 2017, you may find – indeed, we would perhaps say you deserve to find – that your property is no longer top of the pile.

If you are a client of ours, then you already know our advice is to stay sharp and thereby stay ahead. A fresh coat of paint as a minimum, at least every five years (but take the opportunity between tenancies), good and modern (and working) appliances, safe accommodation, and – to secure the best tenants when it comes to it – proper professional-level marketing photos.

These things will go a long way.

Landlords: Higher Entry Costs, Lower Margins

The numbers behind the scenes tell a slightly more sobering story for landlords.

• Upfront costs for landlords have increased 63% year-on-year, now averaging £16,800 when we factor in deposits, Stamp Duty, licensing, legal fees, and basic compliance – this being on top of the price of a property, and also being based on national averages; expect the average for a London landlord to be proportionately higher.
• Annual running costs have fallen by around 24%. Hard to believe, as maintenance costs certainly haven’t fallen – but this figure is largely driven by interest rates settling a little, and therefore more relevant to landlords with buy to let mortgages.

Nevertheless, in any case, when you add everything together, total returns (rental income + capital growth) are down around 6.6% compared to last year.

That doesn’t mean letting properties is no longer worth it. Far from it.

But it does mean that the days of hands-off, high-margin landlording might well be behind us.

Today’s landlords do need to think strategically, and work with professionals to really maximise their returns.

They need to treat their rental property like a business. Thoughtful, tactical investments, clever and proactive tax planning, and a plan for tenant retention. These things now count in a way that they haven’t in years past.

What Should Landlords Do Now?

The influx of new listings is a positive sign. With so much negativity and hyperbole surrounding the Renters’ Rights Bill, it is encouraging to see landlords re-letting rather than exiting the market – as has been projected by scaremongering headlines and articles.

For tenants in South London, it is great news – it means more choice and less competition driving prices beyond reach.

For landlords of course, a softening market slows down revenue growth, even as costs are increasing – and this will be a problem for some. Nevertheless, there are some straightforward steps landlords can take to protect their interests:

1. Review Your Rent

With rents still rising (just perhaps more slowly), now is a good time to check whether your property is in line with current market value. Our advice really is to please not be greedy – overpricing in a cooling market can cost you good tenants and lead to longer voids. However, it is justifiable in any market to make sure you are achieving a fair market rent.

2. Make Your Property Stand Out

With more stock hitting the market, tenant choice is growing – and at the same time, in this age of Instagram, tenant expectations are rising.

If your property hasn’t had any updates in recent years, a modest investment in redecoration or replacing old appliances could make a real difference to the rent you can command, and the longevity of the tenancy you can achieve.

3. Plan for Future Compliance

Energy rules, licensing changes, and the Renters’ Rights Bill are all coming down the tracks. It really is time to get your paperwork in order and prepare for upcoming reforms.

4. Keep Your Tenants Happy

Retention is cheaper than re-letting. If you’ve got a good tenant, look after them. A little flexibility or a timely repair can go a long way toward keeping your property occupied and hassle-free. There will be no more renewals, once the Renters’ Rights Bill passes – tenants can give a month’s notice at any point (unless this is by surprise amended out of the final version of the draft Bill). Therefore it is about keeping happy tenants for as long as possible.

5. Get Proactive Support

The days of winging it are no more! If you are a client of ours, we’ve already got your back. If you’re not, I’m sure you’re already working with a switched-on, fully compliant lettings team… but if you aren’t, now’s the time.

We help landlords reduce risk, avoid voids, and get more from their investment.

Our Final Word

The South London lettings market is changing – and change is coming quickly. But with this change, the market is not collapsing. In fact, we’d argue that what we’re seeing now is a more sustainable rental market. One where good properties get let quickly, where fair pricing matters, and one where thoughtful, considerate, astute and professional landlords will really thrive.

If you’re the sort of landlord who wants to stay ahead and protect your time, income, and property, that’s what we are here to do for you, and we genuinely love to help.

Why not call us to book a free lettings review. We always tell things straight.