London's rental market has become a 'nightmare.' Here's why

London(CNN Business) For Rebeca Blázquez, the past few weeks have been a "nightmare."

Based in Madrid but hoping to find work in London before starting her master's degree, the 22-year-old university graduate spent a month searching online for a room to rent in London on a £900 budget ($1,070). She sent dozens of messages to landlords and vacating tenants, and logged in for virtual viewings only to find that the room had already been taken.

"I think that I sent over 100 messages to different ads, and I only had [a] reply to 30 messages," she told CNN Business.

Renters, real estate agents and property search specialists described to CNN Business a frenzied scramble for rental units since the spring as students and workers flocked back to the city after the pandemic.

That surge in demand collided with a steep drop in supply. Data from Rightmove, an online property portal, shows that the number of available rentals in London fell by almost a quarter between July and September from the same period in 2021. Prices have soared as a result to all-time highs.

The average monthly rent, including bills, for a room in a shared house or apartment hit £933 ($1,109) in October, up 17% from before the pandemic, according to data from SpareRoom, the country's biggest roommate search site.

Blázquez said that apartment hunting this fall was a far cry from her experience back in September 2020, when she last rented in the city. She settled on a place earlier this month, but is paying nearly £300 ($357) more for a similarly sized room in a less desirable location.

"I rented it without seeing a video or anything because I was so desperate," she said.

'You can't hesitate'

Matt Hutchinson, communications director at SpareRoom, told CNN Business that the capital has seen a "huge influx" of students, young people and overseas workers in recent months — demand that the pandemic kept bottled up.

At the peak in September, there were almost nine people looking for every room listed on the site.

"We've never seen the market like it is now," Hutchinson said.

Though demand has fallen back slightly since September, it is still higher than the average summer peak, when the market is usually its busiest.

"If someone has advertised a room in the last few months, chances are they're getting hundreds of responses," Hutchinson said. "It's a battle to even get a response or get an agent to see you," he added.

Renters across the United Kingdom are having to go to extraordinary lengths to secure a room.

In a SpareRoom survey of UK renters in September, a fifth said they ended up paying several months' rent up front while another fifth said they had to bid over the asking price to secure the room.

Nearly half said they had to decide during a viewing whether to take the room.

Greg McLoughlin told CNN Business that when he started his "exhausting" six-week search for a room in early October, he was often asked to pay a deposit equivalent to eight weeks' rent — double the typical four weeks.

McLoughlin, who works for a cryptocurrency exchange, said he "rarely got any messages back" on SpareRoom, despite paying an £11 ($13) weekly subscription so that he could respond to ads within seven days of them being posted.

He eventually snapped up a room in a five-bedroom house in south London for £950 ($1,130), though the landlord has warned that the rent will likely increase. Still, he's relieved.

"Everyone's super on edge looking for accommodation," McLoughlin said. "You can't hesitate in this market," he added.

Supply crunch

The problem is simple. There are too many renters chasing too few available homes.

Jeremy Leaf, founder of Jeremy Leaf & Co, a real estate agency in north London, told CNN Business that the number of properties advertised on his site is down by as much as 40% compared to November last year.

Landlords have been leaving the rental market as it becomes less and less profitable.

Since 2016, the UK government has increased taxes on purchases of second homes and cut the amount of tax landlords can claim back on their mortgage payments.

Many landlords are also worried that it will soon become very hard to evict difficult tenants — including those who may be behind on their rent, have caused damage or mistreated their roommates — if the government passes draft laws that prohibit "no fault" evictions, Leaf said. Landlords are able to evict tenants under a different process, but this often takes much longer and can involve a court hearing. Parliament is expected to vote on the new legislation before the end of the year.

Add to that spiraling inflation, and renting out property is not as lucrative as it used to be.

"Just the cost of getting people to renovate properties, the cost of materials has gone through the roof," SpareRoom's Hutchinson said. "Increasingly, landlords are leaving the market because they just can't afford to do it," he added.

Some landlords have even decided to sell up, taking advantage of an uptick in property prices this year, Amelia Greene, a director at real estate agency Savills, told CNN Business. The average asking price in the capital has risen 5% so far this year, according to Rightmove.

Aggravating the supply crunch this year, Leaf said, is that more renters are deciding to stay put and renew their current tenancies for a smaller rent increase than they would get elsewhere.

A sharp increase in mortgage rates is also keeping aspiring first time buyers stuck in the rental market, further reducing the amount of available stock.

'Unprecedented' prices

London rent prices may have cooled a little since their "pretty unprecedented" rises during the summer, Leaf said, but the city's chronic supply shortage means that further hikes are on the way.

"Upward pressure on rents is going to increase," he said.

The average monthly rent for a two-bedroom apartment was £2,226 ($2,646) last month, Rightmove data shows. That's 19% more than in February 2020, before the pandemic led to an exodus of workers from the capital.

Savills expects the average London rent — across all property types — to jump another 5.5% next year.

Those who are paying less are having to make big compromises.

Sally Vince, who works in commercial property, told CNN Business that after a "very stressful" time looking for her £700 ($832) room this summer, she took what she could get.

"[I] pay less rent, but I've had to compromise a lot on how many people I'm living with... the amenities available, and just the overall condition of the flat," she said.

Vince compares her search to her previous apartment hunt in 2019. Then, about half of people advertising rooms would respond to her inquiries, but, this year, she received just three replies for the 50 requests she sent out.

"I've got a permanent job now, I know how it works and know a lot of people in London, but it was much, much more difficult this time round," she said.