Lettings Market Report 2022

When we last wrote our annual lettings report this time last year the market was in buoyant mood and a year on things haven't changed.

It's still very much a landlords market the pre-pandemic rents in Wandsworth have not only recovered they have rocketed above those levels, on average at 14.28%, well ahead of earnings (6%).

What's included in the report:

• Rental Inflation way above average earnings
• Chronic supply/demand mismatch
• Registering applicants way above supply
• Offers above asking price not uncommon
• Rental affordability will hit demand and rental increases will slow down
• Demand for 1 bed flats are at an all-time high as couples forsaking extra space
• Demand for 4 bed houses also high due to sharers market looking to lower costs

It's important to distinguish what rental inflation is i.e. when a property becomes vacant and the rent is adjusted in line with the market. 1 in 4 renters move home each year and this group will experience rental inflation in line with new lettings. For the 75% of renters that do not move each year, rental increases are much lower at 4.0% in the year ending 2022.

This year we have had many tenants staying put as they know we aren't going to increase the rent as much as when it comes back on the market. I can see this trend continuing next year, another trend which will continue are the many applicant registrations per property due to the supply/demand mismatch. Tenants will have to pay above asking asking prices to secure a new let. No wonder tenants are staying put, which in turn wont help on the supply side. However, some modest improvement in rental supply as the sales market weakens. Landlords looking to sell homes may now continue to rent them out while uncertainty in the wider sales market lasts.

The chronic mismatch with supply/demand means that it's not unusual for prospective tenants to make offerss over the asking price without viewing to secure the property. They are soley basing their offers on our professional photos, floorplans and video tours. It's not our policy to accept a potential offer without a viewing, whether it goes over asking price or not, the point is it happens in a market where the dynamics and conditions make it so.

Will Rent Increases Slowdown In 2023?

The only way it's going to come down is if we have more supply, which is not a short term fix. There are many more properties which are rented out on short lets via the Airbnb route, this would help on the supply side, if they came back on the market as long lets. We are definitely going to see a slow down in the sales market in 2023 and this may entice more sellers to rent out their property, instead of selling,

If rental growth were to continue to run at unsustainable levels over 2023, the proportion of earnings needed to pay rent would be stretched further to around 38-40%. This is just crazy, for this reason rental affordability will start to hit demand and rental increases will slow down. As it just becomes too unsustainable for rents to keep rising on the same upward trajectory. We anticipate rental increases to rise by up to 5% in 2023.

Renters forced to look for smaller homes or share

We have found that the demand for 1 bed flats have soared this year as couples who preferred extra space in a 2 bed flat would rather settle for something smaller in today's market.

The other property type which has fared very well this year are 4 bed flats and houses, more sharers are getting together and splitting the costs. We would register at least 30 to 40 applicants for a property of this type. Where we may have seen 2/3 sharers going for 2 or 3 beds in years gone by. Now it's more the merrier and you can really get good rent for these types of property. Which is a win - win for both landlords and tenants!!