Foxtons, which yesterday issued its latest trading update – for the year ended 31 December 2021 – has published a fresh report on the London lettings market.
The Winter 2022 London Lettings Report is focused on what the estate agency describes as ‘the capital’s thriving private rented sector’, including the opportunities in the market today for higher yields; how regulation is providing an impetus for landlords to become more professional; and the value of modern property management through a team of experts.
Foxtons points out that research shows that the private rented sector currently provides homes for 27% of Londoners, potentially increasing to 40% by 2030.
With a number of looking for rental homes, Foxtons saw a 57% increase in the number of lettings applicants in 2021 compared with a year earlier.
In terms of spotting an opportunity fir investment, Foxtons says that historical data shows that the current climate could present high-yield investment opportunities.
Ten years ago investors found attractive yields in Hackney and Stoke Newington and fast-forward 10 years, they have seen rents and sales price growth exceed London averages. In Hackney, weekly rents have increased by +32.7% compared to 2010 and in Stoke Newington weekly rents have increased by +37.3% compared to 2010.
Croydon and Barking are two boroughs currently with similar apartment prices and rents to those last seen in Hackney and Stoke Newington in 2010. According to Foxtons these areas offer a lower entry-point investment and enjoy above-average gross yields.
London house prices have increased by 219% over the past 20 years, showing short-term challenges are normally outweighed by a long-term potential gain. Growth in the London residential market (+78.3%) has also outpaced the UK residential market (+55.5%) and showed significantly better performance than both the FTSE 100 (+30.5%) and gold (+6.5%) in the last 10 years.
Foxtons also points to growing professionalism in the PRS.
The company says regulation is providing an impetus for landlords to become more professional and many are choosing to so do with the support of a property management service.
Also, tenants are increasingly insisting on managed properties and are often prepared to pay a premium for it.
Average rents per week are 9.6% higher in London on managed tenancies than those on non-managed.
After its pandemic dip of 2020, the London rental market, particularly in central London, has rebounded strongly with high levels of rental growth reported at the end of 2021, according to Foxtons.
The company points out that demand remains high and the ratio of new renter registrations to new properties listed was above the three-year average throughout 2021.
In Q4 2021 there were 20 renter registrations for every home listed, more than twice the average seen between 2018 and 2020.
In terms of supply, new instructions continued to fall in Q4 2021, 42% below Q4 2020 levels but just 6% below Q4 2019 levels.
By the end of 2021 average rents had exceeded the level that they reached before the Pandemic across London as a whole and had markedly surpassed in Zone 1.
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