A new independent research paper by Professor Michael Ball at the University of Reading, entitled Renting in London: The Coming Boom, claims that the lack of housing supply in the capital is expected to push rents up significantly over the next 10 years.
The Government predicts that household numbers in London are to rise between 34,000 and 38,000 each year up to 2028. Optimistic figures show that the number of new homes each year will only be 21,000, resulting in a huge deficit. The effect of this will be that people are either forced to pay more, crowd into existing homes or simply leave the city.
The supply deficit, although alarming, does offer an opportunity for residential investors in the capital particularly those with portfolio buy to let mortgages, to provide long term rented accommodation for those living and working in London.
Income yields are thought to rise with capital growth in the coming years and Professor Ball predicts an average rent of 5% each year for the next ten years, exceeding house price rises of just 4% annually.