Rents in London are expected to increase further in 2019 due to the widening supply-demand imbalance in the capital’s rental market, according to Chestertons.
The London-based estate and letting agents, which has 33 offices, reports that some pockets of the capital saw ‘considerable growth’ in rents this year, led by gains of about 30% in Chiswick.
Meanwhile, the company says that Tower Bridge and Covent Garden saw an annual increase of 17% and 15% respectively, owed primarily to an exodus of landlords from the buy-to-let market in response to the phasing out of tax relief on finance related costs, resulting in a sharp decline in rental property listings.
Rental growth is expected to be sustained in 2019 due to the current gap between supply and demand, but Richard Davies, head of residential lettings at Chestertons, is concerned that affordability will be stretched as rental growth outpaces most people’s wages.
He said: “There will be a limit though where people simply can’ afford to rent in London and landlords therefore need to be realistic with their rents.
“Despite many amateur landlords having to scale back their portfolios or leaving the sector altogether, investing in the London market is still a very attractive proposition for professional landlords with low interest rates, which is likely to continue, and higher rental returns.
“Looking at a longer forecast, the supply and demand imbalance should be largely corrected by the rapidly expanding build-to-rent sector.
“Against this backdrop, we are expecting to see a modest rental uplift next year of 2.5% in London and 2% in prime central London. We forecast that by 2022 we will see a total growth of 11.5% in rents throughout London.”