"Those landlords that are trying to sell are finding they are not necessarily able to do so quickly because there is so much stock around. A number of them are therefore bouncing between lettings and sales and back again after failing to get their asking price"
- Gary Hall - Knight Frank
Landlords selling a prime London property face the challenge of downward pressure on prices.
More are exploring a sale due to the tougher regulatory environment. In addition to the prospect of stricter energy efficiency rules, the forthcoming Renters Rights Bill could make it more onerous to regain possession of a property and raise the risk of void periods.
However, achieving their asking price is not guaranteed.
Average prices in prime central London (PCL) fell 2.5% in the year to June, which was the second largest fall since March 2021, in part due to the political climate, as explored here.
Meanwhile, prices in the more domestic and needs-driven market of prime outer London (POL) are under pressure due to higher levels of supply. As well as an overhang of stock following March’s stamp duty cliff edge, there is competition from other landlords who are also trying to sell.
The result is that some owners are caught in the no man’s land between selling and renting out their property.
“There is a sense of limbo at the moment in the lettings market. We have the Renters’ Rights Bill on the horizon but there is speculation that it could be delayed,” said Gary Hall, head of lettings at Knight Frank.
“Those landlords that are trying to sell are finding they are not necessarily able to do so quickly because there is so much stock around. A number of them are therefore bouncing between lettings and sales and back again after failing to get their asking price.”
Less to let
As more landlords attempt to sell, the result is fewer new properties available to let.
The number of lettings instructions from landlords fell 8% in the year to June compared to the previous 12 months, Knight Frank data shows.
It tallies with data from Rightmove, which shows the number of new rental listings in prime central and outer London was 11% below the five-year average (excluding 2020) in the first six months of the year.
There are reports that the Renters Rights Bill faces delays and may not come into force this year. After last week in Parliament, it certainly can’t be the most pressing issue facing the government.
Average rents in PCL increased 1.5% in the year to June but rose 1.7% over the first half of the year. It was the biggest increase over a six-month period since January 2024, a period when rental value growth was cooling after the market experienced supply shortages during the tail end of the pandemic – see chart.
It demonstrates how rents have started to climb higher as stock levels fall. In POL, annual growth of 1.5% was driven by an increase of 0.8% over the last quarter. The three-month growth figure was last surpassed in November 2023.
What happens next to prime London rents depends more than normal on the performance of the sales market.
