London’s private rental stock expected to fall short of demand

PETALING JAYA (July 8): The supply of rental property in London will not be able to meet demand resulting in an upward pressure on rents, according to property consultants CBRE London in its recent publication, “London Living: The diversity of renting”.

It reckons that London’s “private rental stock” will not match this increase.

“The number of households in London is expected to increase by over 400,000 to 3.8 million by 2021. Assuming the share of private renters remains the same at 30%, this suggests an increase of 127,000 private rental households between now and then,” CBRE said.

The property consultant firm says currently, there are about 160,000 new rental units in the pipeline, but estimates the increase in private rental households by 2021 is 216,000. It says this undersupply will impact rents.

Also, CBRE says that at least 32% of London households will be renting by 2021, compared to 30% of households currently.

It adds that one of the reasons for the growing demand for rental property is that private renting no longer caters just for the needs of ‘pre-home ownership’ young workers.

“In particularly, people are renting longer and often well into early family years; half of all renters are over 34 years old,” says CBRE.

The publication categorises the London tenant base into nine broad categories, including low-income sharers, domestic students, international students, professional singles, professional couples, professional sharers, low-earning families, mid-to-high earning families, pied-à-terre (short-term stays) and corporate/relocation lets.

One of the interesting findings on the tenant base is that 75% of international students live in inner London, and that almost 80,000 of the over 280,000 students in London live in the private rented sector.

London’s average annual rental growth since 2011 of 4.4% outpaced the country’s average Retail Price Inflation (RPI) rate of 2.7% over the same period.

The average monthly rental for a 2-bedroom London apartment is £2,080 (RM12,321).

The most expensive area is the district of SW1X in Westminster, where the monthly rental averages £5,850.

The central London postcode also helps in fetching a higher rental rate; a 5-bedroom apartment at the exclusive One Hyde Park development is currently listed at £45,000 per week or £195,000 per month. The occupancy rate of this project is not stated.

The most affordable area of inner London is currently Abbey Wood (SE2) in Greenwich, with average monthly rental of £950.

Monthly rental across outer London averaged £1,270, a discount of almost 50% to inner London.