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London’s rental crisis, what is causing it and what the future holds
The reality for those looking to rent a home in London has long been challenging but there's no doubt the situation has now become quite desperate, with a multitude of issues such as soaring demand, supply shortage, unaffordable rents, and changing market dynamics.
In this post, we explore the background and key factors contributing to the rent crisis and consider the outlook for the future of renting in the capital.
Too Much Demand, Not Enough Supply
One of the main reasons the rental sector is in the current mess is due to the high demand for properties, and the diminishing supply of them. Because the demand is obviously far surpassing the available supply, there's just not enough available homes to go round.
Tenants Committing Before Seeing Properties
Lots of stories have emerged of how potential renters are having to agree to a place without even seeing it in person, but it gets worse, some are getting in to bidding wars with rival renters and paying for many months in advance. This could likely lead to problems further down the line if the property turns out to be unsuitable.
Private Landlords Leaving the Letting Market
Tightening restrictions and loss of tax benefits have also led to many private buy-to-let landlords leaving the letting market in London. The introduction of various regulations, such as changes to stamp duty and mortgage interest relief, has made it financially challenging for private landlords to continue renting out their properties. This has further reduced the available rental properties in the market, exacerbating the supply shortage and driving up rents.
Higher Interest Rates and Mortgages
The recent rise in interest rates has come as a shock and put more pressure on landlords. Many are finding the buy-to-let business model only really works when interest rates are very low. Banks are now much less likely to lend which is further fuelling the shortage of available properties.
Rising Rents and Lack of Affordability
Landlords and letting agents often have the upper hand in setting rents, which has resulted in an increasing number of people either being priced out of the market or spending a significant portion of their income on rent, leaving them with little left for other essential expenses.
Renters Moving Further Out of London
As rents have become unaffordable in central London, many renters are moving further out in search of cheaper properties. This has led to a rise in demand for rental properties on the outskirts of London, which has pushed up rents in those areas as well.
This has also resulted in longer commutes and increased travel costs, causing additional challenges for renters who are already on the breadline as it is.
Impact on Movers and Removal Companies
Another significant consequence of the rental crisis with reduced mobility among renters is the impact it is having on some moving companies within our industry.
With limited affordable rental options available, many renters are finding themselves either stuck in what may be unsuitable accommodation or are just deciding to stay where they are if possible. In addition, the general slowdown or in some places reversal of the housing market is further aggravating the situation.
As a result there are simply less people moving home in London and a relative drop in overall activity. It remains to be seen whether activity levels will pick up again during the summer months, which is traditionally the busiest time for Movers and for people to move house.
Can’t Afford to Buy a Property
With inflation raging and the cost of just about everything going up, it's no surprise that many are now unable transition from renting a property to owning one, which means even more people than usual needing a rental home.
Will Rent Prices Fall?
Without wanting to sound like a merchant of doom, it's difficult to see at this point how rents are going to fall anytime soon. Nothing lasts forever though and we remain optimistic that this crises will pass (at some point).
What's the Outlook
Who knows what's going to happen, but like any big city London needs to keep moving (literally) otherwise it stagnates and declines. It's crucial that solutions are found to ensure that renting remains a viable and accessible option for those living in London.