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Rents have increased. Why and how? Writing from a London perspective.

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There have been some recent key reports coming out in the media of rents rising quite noticeably across the UK.

If I may offer some practical reasons for some of this (particularly in London).

I believe it started in September 2021 (the new academic year). This was before the Omicron variant and things were looking more optimistic at this point. With students, families and workers returning to London, things were looking better across the board, and the rents increased. What was the reason for this? Essentially, not as many properties available.

Why were there not as many properties available? Lots of rentals had already been bolted down within the meaty period of COVID lockdowns, Tenants got in touch with their Landlords on existing tenancies and made deals to extend or re-commit. It was during this period that Tenants had success negotiating the rents down. Meanwhile, there were Landlords that did require to return their properties back to the market, and alongside their agent, did so with caution. Frankly no one knew what was around the corner next in terms of COVID threats. It became sensible to think about securing a let quickly and to "avoid the void". Tenants meanwhile were nervous to commit, many wanted shorter break clauses and therefore the balance of favour did fall on the side of the Tenant to negotiate the rent. This period during COVID was actually quite rapid and agents were absolutely rushed off their feet. Many of these Tenants will still be living off this ticket to date.

I believe from September to late November 2021, demand had been high and rents had increased. Then Omicron impacted everyone in December 2021 and this changed the rental market (quite suddenly actually), as once again - Landlord's became a bit nervous to have a void period over the Christmas period and into the New Year. Deals started to be made once again between Tenants and Landlords.

I know there are presently wider economy implications to think about such as inflation and interest rates, but I believe the above explanations play a large part as why today (April 2022) there is a limited supply of rental availability. Hence why rents have naturally increased.

So what could benefit from happening? The usual transient nature of the rental market needs to return and until this kicks in, the rent's will likely remain on the higher side. This should eventually normalise. Tenancies created before and within COVID will naturally finish, and Tenants will eventually need to move on with their lives (make changes). Those tenancies that end soon may provide a little luck and timing for a Landlord to capitalise on a rent increase. However, I would not be surprised that rental availability in the coming months will snowball a little bit and when this happens, the rents will adjust and normalise.

Personally, I would encourage a Landlord to think carefully if ending an existing tenancy early solely for returning to the market for a higher rent. It's a bit more complicated than this. Whilst there is a lower amount of rent availability across the board, within this there are different demands at different budget levels. Tenants on rolling notice tenancies are similarly watching and waiting themselves, and don't necessarily have to move but will do so when they feel it's right. They will themselves see and read about the rent increases and think "no thanks, I will stay put". Furthermore, I'm always keen to illustrate with a Landlord client that it's bigger picture stuff when you have a positive track record with a Tenant paying their rent on time every month, looking after the property and being balanced in their demands on you as a Landlord. Sometimes these pointers are forgotten to be considered.

I will conclude that previously whenever there had been a new COVID variant, it had caused a mini cycle impact on the rental market. What will be interesting is what happens moving forwards if or when new variants emerge. Will they have the same impact? Or finally, they will no longer cause the same disruption as before.

19/04/22