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Londoners will see little to no increases in their rents this year because the tight supply and soaring demand that drove rents to record highs has “normalised”, according to Foxtons.
Guy Gittins, chief executive of the London-focused estate agency, said he expected rents on new tenancies to rise between zero and 2 per cent on average across the UK capital in 2024, a marked decrease from the 8 per cent average increase last year.
London was “just starting to head back to a more normalised market”, he said, following the influx of people who returned to the city after the Covid-19 pandemic.
Rents surged in London last year as workers and overseas visitors returned following the crisis, and landlords passed on higher mortgage costs to tenants.
Gittins said there were now 20 to 30 per cent more rental properties available across the capital compared with the same point last year, with fewer applicants chasing each one.
“Large price increases . . . really will be kept at bay,” Gittins added, thanks to “considerably more stock across London, not just at Foxtons but in general in the market”, which is “great news for tenants because it means more choice”.
However, he cautioned that the market remained tight compared with the long-term average. “There are still more tenants looking and fewer properties on the market,” he said. Foxtons said rents remained at “elevated levels”.
The forecast of slower rent growth will bring relief to tenants who have suffered through a period of record price increases.
Higher borrowing costs on mortgages have forced some buy-to-let landlords to sell their properties, reducing supply, or pass on the increases to their tenants. Mortgage rates have stabilised since late last year after the Bank of England held interest rates.
Private rents in London increased 7 per cent in the year to January 2024, according to the Office for National Statistics, the highest increase on record. The average rent on a newly let property in Greater London stood at £2,315 a month in January, according to Hamptons.
The red-hot rental market has helped Foxtons, which derives 70 per cent of its revenue from lettings, to weather the downturn in the home sales market caused by higher mortgage rates.
Foxtons’ lettings revenue grew 16 per cent in 2023, while income from sales fell 14 per cent. The company increased its total revenue by 5 per cent to £147mn and adjusted operating profit by 2 per cent to £14mn.
