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Autumn Statement 2023 | London's lettings market 5
Lenders are competing to
attract Buy-to-Let landlords,
with two-year fix rates currently
starting from under 4.7%.
TOM DAVIES
Managing Director
Alexander Hall
Investment and profitability
Profit levels for landlords have improved
with gross yields for flats in London
increasing to 6% in H1 2023, from 5.2% in
H1 2022. Last summer we estimated that
an average Buy-to-Let (BTL) mortgage rate
of 6.9% would be the breakeven point for
new landlords in London to receive a positive
return after paying monthly mortgage
costs (interest only). Average BTL mortgage
rates remain some way below this level,
and many landlords continue to make a
strong profit from their rental investments.
BTL rates would now need to reach
LONDON'S LETTINGS MARKET
London's lettings market remains busy and highly competitive with 18 new
renters registering for every property listed for rent in the first half of 2023.
As we forecasted in the London Report 2023, we are beginning to see some
increases in supply with 6.4% more properties listed to rent in Q2 2023
compared to the same quarter a year ago, which is welcome news for renters
and the wider market. Pressure on rents is moderating slightly and a more
normalised seasonal market is beginning to emerge.
around 7.4% to erode this profit, a level
which is not anticipated. Tax is of course a
key variable in this equation and landlords
will be best served utilising both mortgage
brokers and tax specialists to ensure they
are in the best possible position.
Legislation and regulation
Measures to improve the quality and
professionalism of the sector are to be
acknowledged and we are engaging with
the Government on their future plans.
Complying with changing legislation
increasingly requires a level of expertise
that landlords are reluctant to maintain,
which is why we've seen the percentage
of our letting book using our professional
management increase by a third since 2022.
LONDON'S
NO. 1
LETTINGS
AGENCY
NEW
PROPERTIES
REGISTERED
EVERY WEEK
RENTERS
REGISTER
EVERY
MONTH
FOXTONS
OFFICES
ACROSS
LONDON
c.800 >50,000 >60
with Foxtons with Foxtons
40%
6%
OF LETTINGS BOOK
UNDER PROFESSIONAL
MANAGEMENT
UP FROM 30% IN 2022
GROSS YIELD FOR
FLATS IN LONDON
H1 2023, UP FROM 5.2% IN H1 2022
Foxtons
Foxtons
Foxtons
Annual change
-40%
60%
40%
80%
20%
0%
-20%
-60%
Q1
2020
Q1
2021
Q1
2022
Q1
2023
Q2
2020
Q2
2021
Q2
2022
Q2
2023
Q3
2020
Q3
2021
Q3
2022
Q4
2020
Q4
2021
Q4
2022
A slight uptick in
supply is leading to
a levelling off in
rental price growth.
CHANGE IN
KEY MARKET
INDICATORS
Supply Demand Rents