London landlords forced to become more realistic about rents

Seven out of 10 landlords in the capital are now pricing at or below market levels after tenants’ salaries failed to keep up with rocketing rents, Hello Neighbour’s latest Insights Report reveals.

The lettings platform found the number of properties being marketed at 10% over market value was just 6%. Meanwhile the number of landlords pricing at any amount above market levels has fallen to just 30%, with 70% of landlords now pricing at or below market levels.

RENTAL LEVELS FALL

Richard Jenkins, Chief Executive of Hello Neighbour, says: “We expected to see the growth in rental pricing slow. We have in fact seen a fall in London rental levels from an average of £2,261 last month to an average of £2,219 in March.

“This is a 2% fall and means that rental growth over the last three months is now only 2%. Even year on year growth is now just 4.1%.”

Concerns are also mounting that higher buy-to-let mortgage costs are about to ‘present a significant challenge’ to landlords who have already passed on those costs to tenants through higher rents.

Plateauing rent levels mean increasing rents to mitigate increased mortgage costs is becoming much more challenging, if not impossible.”

Jenkins adds: “The plateauing rent levels mean increasing rents to mitigate increased mortgage costs is becoming much more challenging, if not impossible. With 40% of mortgaged landlords having to renew their mortgage in the next year, this promises to create a significant issue for the rental market.”

MORTGAGE DEALS

And although buy-to-let mortgage rates may be about to fall Jenkins reckons they won’t fall fast enough for the large numbers of landlords who will have to renew their mortgage deals this year.

He says: “Rates will remain considerably higher than a couple of years ago, which means landlords due to remortgage will face much higher repayments.

“This promises to put landlords between a rock and a hard place with increased costs, but no way of mitigating them in a falling rent environment.”

The Neg revealed last October how Hello Neighbour had launched its campaign to stop landlords who rent property through high street letting agents ‘wasting up to £1 billion a year’ paying ‘unfair renewal fees’.