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Paramount Properties

London Property Market: Q1 2023 Lettings Insights and Trends

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Let's be honest: headlines about the property market in London can be overwhelming and even downright contradictory. You may find yourself wondering: How do I know what to believe? especially if you're trying to make decisions about buying, selling, letting, or investing. 

Well, we're here to separate fact from fiction and help you navigate through the noise. 

Whether you're a prospective buyer, seller, investor, or simply curious about the state of the London property market, this will provide you with valuable insights to help you make informed decisions.

So, let's dive in and uncover the truth.

This week, we're looking at the London lettings market in the first quarter of 2023.

It's true that rents have been on the rise. This is due to a mix of factors that include a limited supply of new properties available, landlords (or owners, as we say) facing higher mortgage rates, would-be first-time buyers staying in rented property due to higher mortgage rates, and, of course, the desire to live in the capital bringing people in from outside London and abroad.

Compared to the first quarter of last year, in Q1 this year, we saw nearly the same volume of new enquiries coming in - 94% to be exact - for just under 80% of the volume of available properties we had last year. 

Beginning in the same time period, there were also nearly 40% fewer new tenancies. So why has there been such a decrease?

The answer lies with renewals. Between January and May of this year, nearly 85% of our tenants decided to stay and renew their tenancy agreements. This means fewer properties are reaching the market. 

For tenants (or residents), this will partly be due to the competitive nature of the current lettings market. But it will also be due to our approach to property. We only work with landlords who care about maintaining a high standard of property maintenance. This, in turn, means their tenants are happy and comfortable and see the value in where they're living.

So, unless they need to upsize or relocate, for example, they are highly likely to stay.

And for our landlords, our average increase in rental income upon renewal this year was 5% higher compared to Q1 last year. Based on an average rent of £1820, that equates to almost £1100 extra per annum upon renewal.

Again, we want to highlight that there is a balance here for tenants, too. Frequently, renewal negotiations between our landlords and tenants result in a new rent that is closer to the market value for the landlord, while tenants would still often experience rents higher on the open market.

And how do those market rents compare to last year? From January to March, rents for new tenancies were up by 11% at Paramount.

The take-home message for landlords is that while some costs are higher (namely mortgage rates), the demand in the market is high, and rental income is still outperforming inflation as long as you follow market value.

And if you have a good agent, they'll be tracking this for you.

They'll also be keeping you up to date with the latest in EPC requirements. Do you know that newly let properties will need a minimum EPC rating of C or above by 2025?

This date may change, but as it stands, agents should work with their landlords to plan ahead.

Over the next couple of months, we'll cover everything you need to know about EPCs, including why we need them, how ratings are determined, how to know if you're exempt, and much more, so make sure to check back!

Lastly, because many landlords still don't know about all of the costs they can expense in their tax returns, we want to highlight the list again here in our February article

We would love to hear from you. Click here to let us know what you think!