London Rents Surge. Why Are Landlords Miserable?

Something weird is happening to the London property market. House prices have risen by just 1.7% over the past year, but rents have climbed by 9.1%. So what gives?

The landlord exodus story, which we’ve been hearing about for years, has evolved into a quantifiable phenomenon and London, where rental yields are traditionally among the lowest in the country, is at the sharp end. In noting that the proportion of newly listed properties for sale nationwide that were formerly rented has increased to 15.6% from 9.8% a year earlier, property data specialists TwentyCI report seeing “landlords exiting the market en masse.”

Unsurprisingly there are also fewer properties available to let, down 16% in the first quarter compared with the same period last year. What was previously a hypothetical worst case is now being reflected in the data with rental costs in the capital now around 40% higher than before the pandemic.

Rapidly rising rents should draw investor capital toward the lettings market and away from the owner-occupied sector, easing the deficit of property buyers and addressing the shortage of rentals. But new environmental rules have undermined the laws of economics.