Robust demand coupled with a dearth of rental properties has resulted in rising rental values across most of the UK, as shown by the latest data from London estate agency Hamptons.
The increase in rents outside London reached the highest figure on record since Hamptons Letting Index was created in 2012. The average rent of a newly let property outside London is now 8pc higher than in February 2020. This amounts to an increase of £68 each month.
Essentially, the lack of stock has driven the strong rebound in rents. Something approaching 300,000 fewer rental properties came onto the market since the beginning of the Covid-19 pandemic, a figure around one third less than during the preceding 12 months.
Landlords able to charge higher rents
The reduced number of homes available in the private rental sector (PRS) has meant that almost half of landlords are able to achieve a higher rent than they would have previously. In addition, void periods are falling as rental accommodation is in such high demand.
Aneisha Beveridge, Head of Research at Hamptons, states this year alone has seen a sharp fall in the number of rental homes coming onto the market. Added to which, would-be renters are being offered significantly less choice, which in turn puts upward pressure on rents. Furthermore, there are higher numbers of applicants seeking to rent.
There has also been an upsurge in landlords buying property, as well as a hike in would-be landlords entering the buy-to-let (BTL) sector. Many of these have taken advantage of the combination of the stamp duty holiday and low interest rates.
This situation is likely to continue due to the forthcoming extension and tapered end of the holiday. But this should mean that more rental properties will come onto the market once these sales have completed. In which case, supply could help keep pace with the escalating demand for rented homes.
Rental growth by region
The South East and South West of England have experienced the strongest rental growth with 10.6pc and 9.2pc year on year increases respectively, according to Hamptons research. The North follows with rent increases of 6.8pc and is expected to be especially attractive to tenants and landlords as both can obtain good value for money in the region. All the more so because after successive lockdowns many consumers are seeking a property with enough space to create a study in which to work from home.
The capital’s rental market has fared poorly over the last year in comparison to the rest of the UK. According to the research, Inner London saw rental values fall by a remarkable 17.7pc, while Greater London experienced falls of 0.2pc. Outer London, however, saw rents increase by an average of 5.3pc.
Yet landlords are enjoying healthy yields in some districts of East London, as revealed in research by estate and lettings agency Portico. Barking has the best rental yield in London at 5.9pc and has one of the lowest median house prices across Greater London. Upney and Wall End, also located in East London, came in next with rental yields of 5.8pc.
These figures demonstrate the crucial importance of location to the success of buy-to-let investment. And this is notably the case as the latest rental trends show. In the wake of Covid-19, many tenants have reconsidered their property priorities, specifically regarding location.
Robert Nicholls, CEO of Portico, believes his company’s research shows that if you know where to look, you can still find healthy rental yields in London. In fact, he added, Outer London areas are seeing rent increases of 1-3pc as tenants, who are spending much more time at home, move from the centre to the suburbs in a quest for more space.