London sees steep annual rise in rents to new record high
Average rents in the UK fell in the first quarter of 2019 by 0.2% to an average of £796 a month but where up by 2.7% year on year, the latest national index shows.
But in London, asking rents are soaring up by 8.2% year on year to a record £2,093 per month and in the first quarter they increased by 2.9%, according to the rental trends tracker from property portal Rightmove.
The 8.2% annual growth is the highest in London since Rightmove began reporting this data in 2012 and the data also shows that the reason is that demand is outstripping supply with the number of available rental properties in the capital down by 33% compared with two years ago. Supply in the rest of the UK fell by 13%.
‘There was a temporary slowing and drop in rents in London when the second home stamp duty tax came in 2016 as so many investors bought properties before this came in, leading to a huge increase in rental choice,’ said Rightmove’s commercial director and housing market analyst Miles Shipside.
‘But the lack of new stock since that time has led to rents increasing again, and London renters are now faced with rents that are over 8% higher than this time last year. Outside London, the pattern is not as extreme, but there is still a significant drop in fresh choice,’ he added.
The North East was the only region to have seen a drop in rents over the past 12 months, down by 0.3%, while outside of London the biggest rise was in Scotland, up 6.7%. The highest rents outside of London are in the South East at £1,054 per month.
The ban on tenant fees comes into force in England on 01 June this year and tenancy deposits will be capped at five weeks. Based on the changes, Rightmove has calculated that the cheapest deposits outside of London will be in the North East, at £630 per property on average.
The most expensive will be in London at £2,415 per property. In London the cheapest deposit will be in Rainham at £1,216 with the most expensive in Kensington at £4,065.
‘The upcoming tenant fee ban should spell some good news for tenants and it may lead to more people being able to move more often if they want to, thanks to the reduction in the cost of moving,’ said Shipside.
‘It remains to be seen if the ban will be passed on in other ways such as increasing rents and tenants will still need to find a pretty hefty rental deposit in many areas. What we really need now is more fresh stock for the rental market so that rents don’t continue to rise at the current rate we’re seeing, so perhaps it’s a good time for some investors to consider buying up properties to let out as the tenant demand is definitely there,’ he added.
According to Richard Davies, head of lettings at Chestertons, The Government’s decision to taper and ultimately remove tax relief on finance related costs has had a huge impact on the lettings market and has resulted in a massive decline in the number of new lettings properties coming to the market.
‘This decline has been most noticeable over the past six months as landlords take action before the full impact of the tax changes come into play next year. Chestertons’ own figures back-up Rightmove’s findings, with the number of available rental properties down in the majority of our branches and rents starting to rise again as a result of the supply and demand imbalance,’ he pointed out.
‘The area where this imbalance is most pronounced is South West London, where not only are the number of available rental properties down by 30% compared to this time last year, but the number of tenants have increased by a massive 48%, pushing rents up by around 9%,’ he added.