Rents in London continued to rise in October, bucking the usual trend of a slow-down during autumn months. This is credited to positive factors such as the rising employment and salary rates among tenants, but also to the chronic shortage of properties available.
According to data in the Rentify Property Index, an in-depth study comprising information from over 200,000 properties released this week, the average monthly rent in the capital is £1,467, compared to £1,402 over the summer; growing nearly 5% in just four months.
Greenwich is the biggest grower, with rents up £338 from June to November. It is followed by Brent (up £201), Newham (£197), Lewisham (£194) and Lambeth (£182). In fact, rents have steadily risen every month this year bar July, when they dropped by 0.1 per cent. It is also estimated that seasonal peaks and troughs in rents will cease to exist as demand grows against an increasingly limited supply of properties in the private rental sector. And as tenants are priced out of renting in Central London, we will continue to see rents rise in boroughs further afield.
As we have stated before, long-term tenancies are the new owning for many, and that is unlikely to change any time soon. According to research conducted by consumer comparison tool GoCompare, first-time buyers require a salary of at least £140,000 to get onto the property ladder — an unrealistic goal for the majority whose average salary is just £30,000.
With such fierce competition for tenancies, it can be tempting to raise the rent you are asking for on a property. But it is important to be both fair and realistic with what you charge tenants. Here are some important factors to consider.
- Updated rent values in the area
There is no point on increasing rent in an area where flats can be snapped up at a lower cost down the road. While rents in London are known for being eye-wateringly high, tenants are going to expect something resembling value for money from their monthly rent, be it a desirable location or a concierge service. Do your research, or alternatively let us advise you.
- Length of Tenancy
Short-term tenancies are more of a hassle, as they incur costs more frequently for both the tenant and the landlord around renewals — be sure to incorporate this into the rent. Conversely, if a tenant is willing to sign a long-term contract, this will reduce your financial risk, and so it might be worth offering them a slightly more attractive monthly rent as incentive.
- Quality of Tenant
Some landlords are willing to charge less for a tenant who comes to them with excellent references, a clear credit check, and an intention to stay for the foreseeable. Similarly, somebody whose guarantor is their mum might be considered more of a risk, and rent should be adjusted accordingly.
- Gross vs. net rental income
When calculating the income you expect to get from your rental property, be sure to factor in all expenses, such as maintenance, purchasing, and mortgage.
George Spencer is CEO at Rentify.