Just as many home buyers have forsaken cities in favour of larger properties in rural areas, the trend is being mirrored by the nation’s tenants and resulting in sharp falls in rents.
Rightmove’s latest data and analysis focus on some of the largest city centres across the UK and shed light on the challenges being faced by landlords with empty properties. There has been a marked increase in the number of tenants, currently city-dwellers, who are enquiring about homes in the suburbs, lured by the prospect of a less hectic life and more space.
The greatest changes are taking place in Edinburgh and Inner London. In the former, the proportion of renters exploring a move from the city has risen from 29pc to 37pc. In the latter, 53pc of renters have examined the possibility of moving out of the city, an increase from 45pc during the same period in 2019.
The number of properties available for rent in city centres has increased significantly due to some short-lets changing to long-lets, as well as more tenants moving to the suburbs. Available stock has doubled in half of the cities over the last year. Yet, nationally, available stock has decreased by 9pc compared to this time last year.
Rents falling in inner London
Rents are still rising year on year in some city centres, including Liverpool and Bristol, which are seeing annual growth of 2pc, although this is less than the national average of 3.7pc.
Nationwide, the number of would-be tenants in contact with agents has surged by 27pc compared to the same month last year. Rents outside London have hit a new record of £972 per calendar month, an annual increase of 3.7pc. In fact, this is the first time since 2011 that rents have risen in the fourth quarter of a year.
By contrast, in London, the annual rate of increase began to fall in the third quarter of 2020 and has fallen further since, with rents now 6.4pc lower than a year previously. Essentially, the fall has resulted from the steep decline in inner London rents of 12.4pc, while those in outer London remain flat.
Broadly speaking though, rental demand in the capital in January is still 8pc higher than in the same period last year.
Opportunity for tenants
Tim Bannister, Director of Property Data at Rightmove, believes that the price premium many tenants have been willing to pay for the benefits of city living has been curtailed for the time being.
Although this poses a challenge for some landlords, it also presents an opportunity for tenants who are able to make a longer-term decision to move into the centre of a city, possibly on a two-year tenancy agreement, but at a more attractive rent than this time last year.
Mr Bannister has no doubt that higher rents will become the norm once life returns to some kind of normality, but it will be city centre properties with balconies and gardens that will be able to command the highest premiums. Beyond city centres though, it’s a very different scene, with agents reporting extremely busy markets coupled with rising rents.
Available stock, he says, is lower than the amount that would usually be seen at this time of year. Demand, too, is higher, which should lead to much better propects for those landlords in the suburbs and in smaller towns and villages.
Marc von Grundherr, Director of Benham and Reeves in London, has found as Covid continues to be a problem, many tenants are unwilling to commit to the high cost of renting in central London. This is partly because many are now working remotely from home, but also because the social scene has ground to a halt with the closure of so many businesses and facilities.
Consequently, demand has fallen off a cliff, causing rental stock to flood the market. The high level of excess stock means that landlords are having to accept much lower rents in order to avoid long void periods between tenancies.