The firm has marginally trimmed its rental forecasts, but warns that upward pressure on the prime London rental market will persist this year as the Renters' Rights Act takes hold.
The legislation, which comes into effect on 1 May, increases the risks landlords face around repossessing or selling their property, setting rents and guaranteeing rental income. Those additional risks, the firm argues, will require higher rewards and push rents upward.
According to Knight Frank's head of UK residential research, Tom Bill, this may be exacerbated by a tighter supply as more landlords leave the sector once the new rules are in force. The firm says that it expects 3.5% annual growth in prime central and outer London this year, up from the current respective rates of 1.2% and 2.8%.
Rental activity will also benefit in the short-term as demand moves across from the sales market, as higher borrowing costs curb spending power, and the current geopolitical uncertainty means people keep their options open. Activity has also been supported to some extent by people looking to temporarily move back to London from the Middle East, as explored here.
Tighter rules on energy efficiency standards will also deter some landlords in the longer term and put upward pressure on rents, as discussed on a recent episode of Housing Unpacked with Louisa Sedgwick, head of mortgages at buy-to-let specialist Paragon Bank. Landlords will need to ensure their properties have an EPC C rating by 2030.
“This particular change in legislation, I think, is going to be bigger and potentially more demanding (than the Renters’ Rights Act) because I don’t believe we’ve got the infrastructure to support it,” said Louisa.
