The UK rental sector has maintained stable yields over the last year given bolstered demand as workers return to offices and students return to campus’. Moreover, low long-term rental stock supply levels, relative to high demand, is being exacerbated by the highly active short-let sector.
The prime residential property yield in London remains near the global average of 2.8 per cent according to Savills’ World Cities Prime Residential Index. This was spurred mostly by a shortfall in supply. The number of rental units on the market in the capital reduced by 58 per cent in August 2021 relative to August 2020 whilst there was a 55 per cent increase in the number of tenants looking to move into a new home according to Chestertons.
A number of units have remained on the short-term rental market to service the booming staycation trend given pandemic-related travel restrictions. The UK Short Term Accommodation Association (STAA) conducted a study showing occupancy for short-term rentals rose 36 per cent year-on-year in July whilst for serviced apartments this reached 125 per cent and hotels 139.7 per cent.
Economic signals suggest accelerating growth in the capital. London tube numbers rebounded to 82 per cent of February 2020 levels as of 6 September according to smart building software company, Metrikus. Further, ONS data shows that 241,000 employees were added to organisational payrolls in August. This brings the total number above levels last seen in February 2020.
Given this demand-supply imbalance, London’s rental sector is experiencing heightened competitiveness. This can already be seen in Chestertons analysis for August 2021 revealing that 78 per cent fewer landlords are amenable to rent reductions relative to 2020. As travel restrictions ease, including the new simpler system for international travel being introduced on 4 October, stock will continue to shift towards long-term orientation.
“London remains the beating heart of the private rental sector both in terms of the sheer number of rental properties and the income generated from them,” director of London-based estate agent, Benham and Reeves, Marc von Grundherr