London rents fall as choice for tenants increases

Tenants are facing record asking rents outside the capital as seven weeks of lockdown-limited activity in the rental market has sent demand soaring.

Average asking rents outside London hit a record of £845 per month, which is up 3.4% on the same time last year – the highest annual rate since Q2 2016.

Demand for rental homes is now 40% higher than this time last year, and we saw the number of people phoning and emailing letting agents hit an all-time high on Monday, 6th July.

In contrast, the capital’s asking rents started to fall across April and May. London asking rents are now lower than this time last year, and also £60 cheaper than Q1.

It’s thought that the dip in asking rents across London is a result of landlords with holiday lets now competing for long-term rentals, which has helped drive prices down.

How has this all impacted rental stock?

We saw new rental listings drop by an average of 50% during lockdown, but they’re now up 1% on the same time last year.

Total available stock is also up 1%. However, there are large local variations, with total available stock currently up 41% in London and up 34% in Edinburgh.

Again, this is fuelled in-part by a surge in short-term holiday lets entering the long-term rental market.

Will the stamp duty holiday affect the rental market?

A study by Rightmove among over 400 landlords found that their biggest concern is their tenants falling into arrears, with over half (54%) saying that this was a worry.

Despite the various challenges in the rental sector, a quarter of them are still planning to expand their portfolio.

This may now be boosted further by the recent stamp duty holiday announcement, as although they have to pay the additional 3% they will still make savings on the total amount of stamp duty payable.

What do the experts say?

Rightmove’s property expert Miles Shipside explained that while the current situation isn’t ideal for renters, there may be hope on the horizon if the new stamp duty holiday encourages landlords to invest in more stock, and therefore create more choice for tenants.

He said: “The pause in the rental market has led to some distorted figures over the past few months, especially in cities where landlords with short-term lets made the swap to instead try and find a long-term tenant. 

“Both rents outside London and demand being at a record high isn’t good news for many tenants looking to move right now, especially as we know there will be even more competition for those attractive properties with more space, bigger gardens and a spare room.

“There are early signs that some existing London renters are looking to move further afield, adding to the large increase in the number of properties up for rent on Rightmove in the capital, so prospective tenants there could find there’s some room to negotiate especially if they are happy to sign a longer-term contract than usual.

“Many renters may feel they’ve been left out of the chancellor’s recovery packages, but one glimmer of hope is that the temporary stamp duty savings may entice more investors to expand their portfolio. If this does happen we could see more choice for tenants and in turn prices may stabilise for a while, but it will take some time.”

To read the latest Rental Trends Tracker in full, click here.

READ MORE: Where should renters escape to the country?