(Bloomberg) -- Soaring rental growth in London’s premium districts is set to slow in the second half, with the cost of living crisis curbing the amount tenants are able to pay.
Rents rose the most in more than two decades in the year through June, according to data compiled by broker Savills Plc, taking them past pre-pandemic levels as office workers and international students moving to the city competed to secure a home.
The UK is facing a “summer of discontent” with workers striking in an attempt to secure higher wages to mitigate the impact of inflation that’s soared to a four-decade high. Households are already experiencing the longest run of declines to their incomes since the 1950s and energy bills are set to rise further in the autumn, taking the steam out of the property market.
The increase in rents in upmarket neighborhoods and commuter towns combined with “the increased cost of living will inevitably limit tenant spending power, and therefore growth in the second half of this year, and beyond,” Jessica Tomlinson, a research analyst at the broker, said in a report.
Rental prices at the end of June in prime London were 13.5% higher than 12 months earlier, the data show. That’s the highest annual growth since 1998.
The best performing districts are now in the center and north west of the city, where rents had fallen fastest during lockdown as wealthy renters opted to move out of the capital. Notting Hill, Islington, Wapping and Westminster, which are all popular with finance workers, saw the highest quarterly prices rises.
Students and families are already looking to secure homes ahead of the school term, the broker said.
©2022 Bloomberg L.P.