The impact of the cost of living crisis on London landlords 

Inflation, high lending rates, and the cost of living crisis in general have affected everyone, and things have shot up in price over a short timeframe. It is not only rental tenants who have felt the cost of living crisis, but it has also hit London landlords. In 2022, there were around 4.61 million private renters in England, with over a million in the capital alone. 

At CIA Landlords, we are landlord insurance specialists, so we know all about the challenges that London landlords face. Give us a call on 01788 818 670 or get a quote today to find out more.

Here, we explore the impact of the cost of living crisis on London landlords.

Higher mortgage rates 

House prices are already sky high in London, but high mortgage rates in the capital make it much harder for London landlords to make rental yields on a property. The base rate of interest from the Bank of England rose to 5.25% in August 2023.

Are you a London landlord with one or a handful of properties? If so, high mortgage rates may mean you find it more challenging to expand your property portfolio in the capital without getting into financial difficulties, and you don’t want to be in the position of being unable to repay a mortgage. 

High mortgage rates have been a driving factor behind London landlords feeling they need to raise rental rates in order to make their property investment a viable business venture.

But fear not, mortgage prices should inevitably come down again once things have settled down, and being a London landlord can still be a business savvy investment in the long term. 

Worried about your financial security as a landlord in the cost of living crisis? It is also a wise idea to make sure you take out a landlord insurance policy. At CIA, we have you covered and offer landlord insurance for London landlords thanks to our close contacts with some of the best insurance providers.

Higher costs of maintenance and repairs for rental properties

Tenants have the right to a habitable well-maintained property, and one of the primary responsibilities of a landlord is taking care of property maintenance to ensure this. However, expenses like fuel and general operational costs have made everything more pricey for businesses today. Do you rely on tradespeople to deal with your London property maintenance and repairs for you? Well, you need to be aware that the cost per hour of hiring tradespeople in London has gone up in recent times. 

The sort of tradespeople you need to fix maintenance issues may be professionals like plumbers, buildings, heating engineers, and electricians. After all, any London landlord will know that just about anything has the potential to go wrong with a property at some point, no matter how hard you try. Below, we have found data on the average cost per hour of hiring essential tradespeople in London to demonstrate the high costs of maintaining rental properties today. 

But remember, a way around these costs could include using a letting agent service that takes care of maintenance for a decent price, relying on your own friends and contacts, or doing it yourself if you are a dab hand at property maintenance and repairs. 

Source https://www.hamuch.com/rates/ 

An increased number of worried tenants 

Inevitably, the cost of living crisis has caused tenants living in the capital great amounts of stress, just as it has done with landlords. Rising bills, inflation, and higher monthly rents are some of the things that may be making your tenants anxious. You need to be aware of this enhanced tenant anxiety in light of the cost of living crisis and be empathetic towards it. Another impact of the cost of living crisis on London landlords is therefore a heightened need for them to be acutely aware of their tenants’ worries and needs.

Check out this guide we came up with at CIA Landlords on how to support your tenants in the cost of living crisis. 

More expensive household bills

Everyday household energy bills increased by 54% in April 2022, and this will have an impact on you as a London landlord, particularly if you include energy bills as part of the overall rental package offer for tenants. Even if you don’t include bills, higher energy bills due to the cost of living crisis may mean that tenants who could previously afford to rent your flat are now unable to. 

A solution to rising household bills is making energy-efficient additions to your London rental properties. For example, installing heat pumps, making sure you have proper home insulation, or using LED lighting throughout your properties. Your tenants will be grateful for such measures, and it may encourage future tenants to choose your property.

Expanding your property portfolio in the capital has become increasingly challenging

In order to expand your property portfolio and buy homes in London, you first need a healthy amount of capital behind you. Landlords with plans to expand their property portfolio could therefore find themselves hampered by high mortgage rates, inflation, and a testing buyers’ market that all come with the cost of living crisis.

However, try to think outside the box. Keep a beady eye out for investment opportunities in promising ‘up and coming’ areas of London where you can buy properties at better value for money. Getting in there first and purchasing buy-to-let properties in areas of the capital growing ever more popular with renters could be a smart investment move for you. 

Methodology 

We aimed to use data to tell the story of the impacts of the cost of living crisis in London landlords. We looked at government data on the number of private renters in England, household energy bill increases, and Bank of England interest rate increases. We also took average 2023 hourly rates in London for plumbers, electricians, heating engineers, and builders from the trade rates website Ha Much. 

Sources 

https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2023/august-2023 

https://commonslibrary.parliament.uk/research-briefings/cbp-9491/ 

https://www.hamuch.com/rates/ 

https://www.statista.com/statistics/286444/england-number-of-private-rented-households/