Foxtons has forecasted a cooling period for the sky-high rents that have burdened many Londoners. The dramatic rent increases that have characterised the past year are expected to take a backseat, with predictions pointing towards a much more stable and affordable rental market.
According to Foxtons, the pressure cooker environment of tight supply coupled with soaring demand—a narrative all too familiar for London’s rental market—has begun to “normalise.” Guy Gittins, the CEO of Foxtons, paints a hopeful picture for 2024, anticipating rent increases for new tenancies to hover between 0-2%. This is a stark contrast to the 8% hike seen last year and signals a return to what Gittins describes as a “more normalised market.”
The resurgence of people into London post-COVID-19 had initially led to a spike in rental prices. Last year, as workers and overseas visitors made their way back to the city, and landlords juggled higher mortgage costs, tenants felt the squeeze. However, the landscape is shifting. Gittins notes a 20-30% increase in available rental properties across London compared to last year, easing the competition among applicants.
Good News for Tenants
This increase in housing stock spells great news for tenants, promising more options and potentially curbing the rampant price hikes seen in recent times. “Large price increases really will be kept at bay,” Gittins assures, attributing this to the significantly bolstered inventory, not just within Foxtons but across London’s rental market.
Yet, it’s not all smooth sailing ahead. The market, by Gittins’ admission, is still tighter than the long-term average, with demand continuing to outstrip supply. Rents remain at elevated levels despite the optimistic outlook for price stabilisation.
The backdrop to this scenario involves higher borrowing costs impacting buy-to-let landlords—some of whom have either exited the market, thereby reducing supply, or passed on these costs to tenants. Thankfully, mortgage rates have found some stability since late last year, following the Bank of England’s decision to hold interest rates.
The statistical heartbeat of this trend, as captured by the Office for National Statistics, showed a 7% increase in private rents in London for the year leading up to January 2024, marking a historical high. The average rent for newly let properties in Greater London stood at a staggering £2,315 a month in January, as reported by Hamptons.
Foxtons Weathering the Storm
For Foxtons, the rental market’s fever pitch has been a lifeline amidst the turbulence caused by higher mortgage rates in the home sales sector. With 70% of its revenue stemming from lettings, the company has seen a 16% growth in this area, even as its income from sales dipped by 14%. Overall, Foxtons managed to notch a 5% increase in total revenue to £147 million and a 2% rise in adjusted operating profit to £14 million.