How have have rental prices acted differently to sale prices in the last decade
Introduction
Three years ago, we wrote a piece about how rental values had failed to keep up with sale prices in London between 2010 and 2020. In this blog, we will review what has happened since the pandemic in the context of what happened before.
Rents in London - it's been a roller coaster
The COVID-19 pandemic had a significant impact on rental prices in London, particularly in central areas. In the early stages of the pandemic, rental prices in London dropped as a result of reduced demand, as many people left the city to work remotely or moved back to their home countries. Additionally, the closure of many businesses and entertainment venues meant that there was less demand for rental properties in areas such as central London, leading to lower rental prices in those areas.
However, as the pandemic progressed and lockdown measures were gradually lifted, demand for rental properties in London began to pick up again. With many people returning to work in the city, rental prices have increased significantly. The graphics below clearly illustrate this picture.
Rental prices have continued to rise during 2022
The graphic below shows just how strong the rental market in London was during 2022. The general consensus has been that this continued spike was due to lower stock available in the market, driven by landlords leaving and existing tenants staying put for longer. This has led to increased competition for properties, causing upward pressure on prices.
What have sale prices done during this time?
While rental prices in Central London have recovered and grown since the pandemic, the same cannot be said for sale prices, especially for flats without outside space. The market has been very weak for such properties, but houses on the outskirts of London have performed well. These stronger rental prices compared to sale prices represent a reversal of the trend we saw in the previous decade, where sale price growth outpaced rental growth.
The below charts show that average rental prices in London have increased by 39.3% in the last ten years but by over 12% in the last twelve months alone. By contrast sale prices in London have increased by 62.2% in the last ten years but by only 1.9% during 2022.
Conclusion
The property market, particularly in London, has huge variations depending on the location and type of property, and sales and rental prices do not always move in sync. Use Bricks&Logic to stay on top of the property trends that matter to you!
Author: Michael Joyner, Chief Data Scientist, Bricks&Logic