Rent rises in South West London have significantly outpaced the rest of the capital, despite the imminent ban on tenant fees, according to London letting agents Chestertons.
The Tenant Fees Act – which comes into effect on 1 June – will ban certain upfront letting fees and cap deposits. However, Chestertons claim that renters in the capital are unlikely to feel the benefit as this follows ‘a series of broader legislative changes’ that have pushed landlords out of the market at a time when demand in the private rented sector (PRS) is competitive.
With recent changes to buy-to-let mortgage tax relief and the stamp duty hike for second homes, many smaller landlords have been forced to exit the market – significantly limiting the choice on the market for prospective tenants and driving an increase in rents.
This strain is most apparent in South West London, which has seen a burst in ‘accidental’ landlords. It’s this demographic of landlord – potentially pushed into higher tax brackets and facing an additional 3% stamp duty if they move home – that are selling their buy-to-let property to escape tougher regulation in the sector.
Chestertons’ study revealed the number of tenants registering for rental properties in Q1 2019 rose 48% year-on-year in South West London – the biggest jump in demand across the capital. However, the number of available properties in areas including Battersea, Clapham, Wandsworth and Putney over the same period dropped 30% compared to Q1 2018.
Across London as a whole, Chestertons recorded a 24% annual increase in registered tenants seeking property during the first quarter of 2019, in contrast to a 2.4% fall in the number of available properties.
As a result of tenant demand outstripping the supply of rental properties, the South West was the only region to see a decline in new tenancies during Q1 2019 – down 12% on the previous year. Elsewhere, locations in Central London such as Kensington, Marylebone and Notting Hill saw lettings up 15% year-on-year.
Fierce competition for limited rental properties in South West London has led to rents climbing three times as fast in the area than anywhere else in the capital. In fact, Chestertons reported rents here rise 5.9% in Q1 2019 year-on-year, with only a 1.2% annual increase recorded in Central London, and an 1.8% uplift in the North and East of the capital over the same period.
“Renters may welcome the ban on fees as it saves on upfront costs – but in terms of its impact on people’s finances, it’s distracting from the bigger issues at play,” Richard Davies, head of lettings at Chestertons, said.
“It’s been a turbulent few years for landlords and tenants are starting to feel the impact. With the Government’s reforms to mortgage tax relief, stamp duty on second homes, and the recent announcement of the end of ‘no fault evictions’, the buy-to-let market has become significantly more difficult to manoeuvre and as a result, it’s shrunk.”
However, Davies said there are still good opportunities for landlords – particularly in Clapham, Putney and Wandsworth where demand is high. Wandsworth especially is seeing gains, with the borough registering the third highest gross residential yield behind Islington and Canary Wharf, with rents up 0.4% in Q1 2019.
Davies concluded: “For London’s renters it’s tackling the shortage of available properties that will make the difference – not the overhaul in tenancy fees.”