London rental crisis - 'from bad to disastrous'

Joint research commissioned by the cross-party group London Councils and conducted by the London School of Economics and Savills paints a grim picture of the state of London's private rental market.

Their research revealed a 41% reduction in the number of properties available for private rent since the start of the Covid pandemic and that supply constraints are worsening the near-record level of homelessness in the capital. Over the same period, asking rents have risen by over 20%.

Based on current trends, homelessness in London, currently estimated at 166,000, will reach its highest ever level before the end of this year.

London is a high-cost low-yield market for property investors and is highly susceptible to rising mortgage rates turning previously profitable properties cash negative. Many investors are leaving London, either exiting the market altogether or reinvesting their capital in higher yielding regions. As a result, London's buy to let market is contracting.

"A bad situation is becoming disastrous" according to Darren Rodwell, a spokesman for London Councils, adding "Homelessness is a national emergency, but with London accounting for two thirds of England's temporary accommodation placements we are at the epicentre of this crisis."

Abigail Davies, director at Savills commented "London's private rental sector, which provides homes for over one million households.... Many (landlords) have high levels of borrowing who find themselves at the sharp end of the turmoil in the mortgage market.

"The triple whammy of the rising costs of borrowing, greater exposure to tax and regulatory change means many are exiting the sector, putting downwards pressure on supply against ever-rising tenant demand. Further upwards pressure on rents seems an inevitable consequence."