Average asking rents in Great Britain are rising at the fastest rate ever recorded and have reached £1,068 per calendar month outside of London – a rise of 9.9% against this time last year.
According to the latest data released by Rightmove, this represents the highest annual jump on record and sees the sector recovering from the slowdown in rental growth in the months immediately after the pandemic started.
This rapid growth in average asking rents, driven by high tenant demand and low numbers of rental properties available, means that rising rents are outpacing house price increases in all but three regions (East Midlands, South West & South East).
Wales (+12.7%), the North West (+12.5%) and the South West (+11%) lead the way in annual asking rent growth, while London hit record annual growth of 10.9%, with asking rents in the capital now 3% higher than before the pandemic started – the first time they have risen beyond pre-pandemic levels.
Pontypool in Monmouthshire, Wales saw the largest annual increase in asking rent of any local area, jumping 20% from £562 pcm to £674 pcm, followed by Ascot (+18.8%), and Littlehampton (+17.5%).
London completes its recovery
At the end of 2020, London recorded a near-record 6.4% drop in average asking rents, as demand shifted away from the capital during another lockdown. Tenants looked for more space outside of cities, flats temporarily fell out of favour, and landlords offered tenants willing to stay cut-price rents.
By the end of 2021, London rents are higher than before the pandemic started, as its popularity returned and landlords were able to negotiate higher rents for the new year.
Inner London rents also grew at a record 16.2%, recovering from its drop of 14% at the beginning of 2021, to also rise just ahead of pre-pandemic levels for the first time.
The squeeze on available rental homes
The imbalance between high tenant demand and low rental stock is supporting asking rent rises and has led to competition between tenants for the rental properties available nearly doubling (+94%) compared to the same period last year.
Total rental demand is up by 32% compared to this time last year, while the number of available rental properties is 51% lower. This has led to available rental properties being snapped up by tenants in just over two weeks (17 days) on average.
However, the number of available rental properties is 7% higher than the same period in December, a sign of availability improving at the start of the year.
Flats have seen the highest increase in competition compared to last year (+132%), followed by terraced houses (+40%) and semi-detached homes (+30%).
Newly published rental yield from Rightmove reveals that the average yield across Great Britain is 5.5%, which is the highest yield since 2016 when it was 5.6%. The North East & Wales have hit record yields, while yields in London, South West and Yorkshire are at their highest since 2015. Yields in the East of England and South East are at their highest since 2016.
Tim Bannister, Rightmove’s Director of Property Data, said: “2020 was defined by the race for space outside of cities, as tenant priorities changed and many moved further out looking for a larger property with green space or temporarily moved back in with family. London was perhaps the biggest example of this, where landlords significantly decreased asking rents by the end of the year to encourage tenants to stay in the capital. A year on, asking rents have finally risen beyond pre-pandemic levels, a sign that the capital has not lost its pull and popularity with renters as landlords look to renegotiate previous cut-price terms.
“Tenant demand continues to be really high entering the new year, meaning the imbalance between supply and demand is set to continue until more choice comes onto the market for tenants, which has led to our prediction of a further 5% increase in average asking rents in 2022. Landlords understand the importance of having a good, long-term tenant, and there is a limit to what renters can afford to pay, which will prevent rents rising at the same rate we’ve seen over the past year.”
Marc von Grundherr, Director of Benham and Reeves, said: “The London rental market is drastically different to that seen in 2020 when landlords were forced to heavily reduce asking rents to secure a tenant and avoid lengthy void periods due to an exodus of market activity from the capital.
“In fact, the surplus of available rental stock that accumulated due to the pandemic has now plummeted and this has been driven by a staggered return to the workplace and, in particular, a huge influx of demand from overseas students.
“We’ve also seen a huge increase in the number of tenancy renewals which have even exceeded 2019 levels and so while some areas are yet to see rental values return to the pre-pandemic norm, it’s only a matter of time as the market looks set to continue to this strong return to form throughout 2022.”
Richard Davies, Head of Lettings at Chestertons, says: “London’s rental market has been witnessing a flurry of activity over the past year. During the peak of the pandemic, we saw many renters seeking a new home at a better price or with outside space which led to increased enquiries for areas outside of central London such as Barnes, Richmond and Kew.
“As 2021 unfolded, the market registered a gradual return of corporate tenants, international students and professionals who considered a partial return to the office and therefore required a property closer to central London. We have seen this demand continue throughout the usually quieter month of December and predict activity levels to remain very high for at least the first quarter of 2022.”
Davies concludes: “Many renters were able to secure a better-priced rental home during the pandemic and are keen to hold on to a good deal as long as possible. With fewer tenants willing to move, the number of properties coming back onto the market for rent, particularly at the more affordable end of the market, will equally decline. As such, tenants wanting to move this year may need to be willing to compromise or consider less central neighbourhoods in order to secure a suitable property within their budget."