The big squeeze: central London rents rocket as number of rental homes drops by 17% in a year

Generation rent is being squeezed from the centre of London and deep into the suburbs as landlords rid themselves of expensive central properties and invest on the capital’s fringes instead.

Exclusive research, published today, finds the total number of homes available to rent in London has fallen by 17 per cent year on year. Yet demand continues to grow.

The disparity has pushed rents up to an average £1,785 a month.

The study, by Hamptons International, found that the more expensive the location the bigger the drop in the number of homes to let.

In Kensington, Islington, Westminster, and Camden, the number of available rental homes has crashed by a third and rents have risen.

In Kensington & Chelsea and Westminster the average rent has topped the £3,000-a-month mark at £3,110 a month and £3,169 a month respectively. Average rents in Islington and Camden are now over £2,000 a month.

There have also been big drops in rental supply in Hammersmith, Richmond, Lambeth and the City, with rents creeping upward as a result.

At the other end of the scale, far-flung boroughs such as Havering, Haringey, Bexley and Barking have all seen substantial annual increases in the number of homes available to rent in the last 12 months.

Unsurprisingly, average rents in these locations are far lower than in central London. The average monthly rental in Bexley, for example, is £1,100.

However, young renters pushed into outer London in search of value for money will have to factor in higher transport costs if they want to work or socialise in Zones 1 or 2.

London’s first-time buyers have already been pushed to the outer edges of the capital to find affordable homes.

David Fell, research analyst at Hamptons International, says the large falls in the number of homes to let have been prompted by landlords selling up buy-to-let properties after tax relief on their mortgage interest payments was removed in April, reducing their profit margins.

And a recent study by the National Landlords Association found that 84 per cent of existing landlords had no plans to increase their rental portfolios after Stamp Duty payments were increased last year.

“In September this year there are 17 per cent fewer homes on the market to rent than last September and the fall in supply is beginning to put some upward pressure on rents,” says Fell.

“As stock levels have dropped and demand remains, tenants find themselves with less choice. As a result rents began to creep up in July after eight months of falls.”

However, despite a squeeze on their profits, Fell notes that “landlords haven’t gone away”. “Over the year, their interest has steadily rippled out from the centre of the capital,” he says.

“In a bid to find better yields and cut their Stamp Duty bill, investors who had been buying in central London are now looking in outer London. And some landlords who had been operating on the capital’s outskirts are now looking outside London.

“In September over half of London-based landlords bought outside the capital, an average of 38 miles away.”