Rents could soar on the back of London housing shortage

Anyone searching for a flat to rent in St Johns Wood will find that there are not that many homes to choose from. In fact, anyone looking for a home to rent anywhere in and around prime central London will almost certainly discover a dearth of properties to let due to the growing housing shortage in the capital.

Log-on to any major property portal and search for ‘houses to rent in Fitzrovia’ or ‘apartments to rent in Mayfair’ and you will see that there is a restricted selection of properties to choose from.

The growing demand-supply demand imbalance in prime central London may be welcome news for landlords, but it is creating problems for some tenants as rents continue to soar.

The cost of renting a home in England and Wales increased by 1.1 per cent in September to reach a new record high of £741, on average, per month, according to LSL Property Services. This was 1.1 per cent higher than August and 3.2 per cent up on the same month a year earlier.

“Rents have risen consecutively for half a year as tenant demand strengthens on the back of a historically subdued mortgage market,” said David Newnes, of LSL.

He added: “Every pound monthly rents go up by is another pound that renters cannot save for a deposit for their first home. This is lengthening their stay in rented accommodation, and increasing competition in the private rented sector.”

With housing supply unlikely to improve anytime soon, many experts project that rental prices across many parts of the UK will continue to soar, particularly in prime central London.

The average rent in London is set to rise to £404 per week by 2018, according to a study by the National Housing Federation.

David Orr, Chief executive of the National Housing Federation, said: “Only by addressing the chronic undersupply of new homes can we stem the financial pressure on families.”

Many would-be vendors have decided not to sell their homes and take advantage of the buoyant rental market by letting them out instead, according to Julia Garber of Sandfords’ letting division, which specialises in offering houses and apartments to rent in Fitzrovia, St Johns Wood, Marlebone and Primrose Hill.

Garber said: “High rents have rents have persuaded many property owners to remove their flats and houses from the sales market and let them out instead.”

Increasing rental values is also expected to attract more buy-to-let investors seeking to beat historically low bank saving rates.

With savers receiving dismal returns from banks and building societies in stark contrast to soaring rental prices and higher yields, more people, and not just existing homeowners, are unsurprisingly turning to buy-to-let property as a means of supplementing their income.

Adam Feather, director, Robert Anthony estate agents, commented: “Existing property market conditions in London are perfect for landlords. With many would-be property buyers struggling to gain a foot on the housing ladder, rental demand will inevitably rise further, pushing rents higher in the process. That’s why buy-to-let properties generally offer stable, low risk investment returns.”