Areas where demand is increasing more quickly than supply are predominantly outside the South East and rental growth is beginning to reflect this, according to the report from national firm Countrywide.
While Greater London saw an increase in average monthly rents of 3.4% over 2013, rents in central London decreased 0.2%, reflecting significant increases during 2012 partly due to the Olympics effect, the report points out.
The picture is similar in the South East where average monthly rents fell 0.5%. However, areas outside London and the South East have seen higher rental growth after sub inflation increases in 2012. Across Northern England average monthly rents rose 3%, a rate which Countrywide expects to continue in the first part of 2014.
The report explains that while changes in rents are a product of supply and demand, they are a reflection of what people can afford to pay. In 2013 rents and wages increasingly aligned. The strongest wage growth and the largest increases in rents have been in the Northern Regions of England, in Scotland and Wales. Rents have closely reflected the growth in earnings, with the exception of London, where wage growth has been more subdued.
The South East saw new demand for property matched more closely by the number of new rental properties coming onto the market. Across the South East as a whole, the number of new properties available to rent increased 4% more quickly than the number of tenants looking for property. The impact of this has been a 0.5% fall in average monthly rents in 2013.
While tenants in London and the South East still face the most competition for rental property, there are signs that this is starting to change. Areas outside Central London and the South East have seen demand grow more quickly than supply throughout 2013.
Inside the capital, East London has proved to be the exception to the rule with demand rising a third more quickly than new supply in2013. In 2012 Countrywide saw an average of 6.5 tenants competing for each rental property in East London compared to eight in 2013. This compares to an increase in the number of tenants competing for each property across London as a whole rising from 5.1 to 5.4 in 2013.
The North East, South Yorkshire and Wales all saw substantial increases in tenant demand which has not been matched by an equivalent increase in the number of rental properties.
‘Last year saw the focus of demand shift sharply northwards after several years of more stable levels of supply and demand. Increased competition among tenants for properties has intensified which has resulted in rental growth running at twice the level of 2012. The largest increases in demand have been in those towns and cities where the most new jobs have been created as the recovery spreads outwards from London. As the economic recovery takes hold across the North, we expect wage growth and rents to track inflation more closely in this region,’ said Nick Dunning, Countrywide group commercial director.
‘The large increases in rents seen in London and the South East in 2012 were not been mirrored in 2013. While rents in London continue to increase, the rate of increase has reduced substantially and is closer to the average increases seen across the rest of the country. In 2013, the North and Midlands regions have increasingly been playing catch up with London and the South East where rents increased at twice the rate of the rest of the UK in 2012,’ he explained.
