"High employment levels and the return of professionals and students to London mean 2023 is likely to remain a landlord’s market"
Having analysed its own data, the report has revealed that over the last quarter, average agreed rents on their renewals increased 7.4%, whilst rising 5.5% in the twelve months up to December 2022. With a shortage of stock and increased competition, many tenants chose to renew at a higher rent rather than re-enter the lettings market, which resulted in landlords negotiating favourable renewal price growth broadly in line with inflation.
Meanwhile agreed rents on new tenancies increased substantially throughout 2022 due to unprecedented demand and competition as professionals continued their return to the office. With London Central Portfolio’s stringent referencing of prospective tenants and beautifully designed rental homes, its landlords enjoyed 19.07% rental price growth over the last twelve months.
This unprecedented demand is being fuelled by the return of the international tenant, similar to levels seen pre-pandemic. Nearly half of London Central Portfolio’s new tenants were from outside the EU and UK, compared with 41% in 2021. Whilst tenants from the EU decreased from 41% in 2021 to 28% in 2022. Unsurprisingly, tenants from Asia-Pacific increased slightly from 15% in 2021 to 21% in 2022.
High-net-worth students represented the highest number of new tenants at 32% with the majority from overseas, followed by the financial sector at 28%. Meanwhile, those from the technology sector nearly tripled to 17% in 2022 compared with only 6% in 2021, highlighting Prime London’s growing position as a global technology hub.
With tenant demand so high, this has had a positive impact on how quickly London Central Portfolio has been able to secure tenants for their landlords. Within their managed portfolio, the time taken to let a vacant property hit historic low levels in Q2 and Q3 2022 at circa ten days, whilst the void periods in Q4 were the lowest final quarter levels seen on record at 17.8 days.
In terms of length of tenancies, the average length of tenancies reached 20.1 months in 2022, similar to levels witnessed pre-pandemic. London Central Portfolio’s tenancy length did peak in 2021 at 23.3 months during a time of lower rents and the global pandemic making moving home more challenging, but despite a drop, tenants are still keen to extend beyond their initial 12-month period, aware of increasing rents and lack of supply.
Andrew Weir, CEO of London Central Portfolio, commented: “2022 will be remembered as a boom year for residential landlords. Unsurprisingly we saw an increase in appetite for buy-to-let investments from both sophisticated and experienced landlords alongside new investors looking to enter the market for the first time. We believe that rental growth in Prime Central London could begin to flatten out in 2023, affected by the inflationary economic climate.
However, we do not expect rents to drop by any significant amount as demand will stay consistent. High employment levels and the return of professionals and students to London mean 2023 is likely to remain a landlord’s market. Lack of supply of rental stock continues to be an issue due to suppressed investor activity during the pandemic.”