Inner London rents to finally turn positive

Annual rental growth across inner London should finally turn positive next month, after 21 months of falls, the Hamptons Lettings Index for October says.

Rents are still 20% below where they stood before the pandemic, meaning property prices across inner London typically cost £530 less than during their peak.

Nationally rental growth remained resilient in October, with rents rising 7.9% over the last 12 months.

Outside the capital, rents are up 11% year-on-year, the fifth month running they’ve increased in double digits.

Rents rose faster in the South West than anywhere else in the country, up 15.3% annually.

Aneisha Beveridge, head of research at Hamptons, said: “There are few signs that rental growth is slowing as the year ends meaning that if growth continues at current rates, we are likely to see rents outside the capital hit £1,000 per month by the middle of next year.

“At the same time, rents in London are starting to recover their pre-pandemic momentum which will serve to bump up the headline rental growth figure nationally.”

Larger homes drive the increase

Rental growth has been led by the larger properties on the market.

The cost of renting a four-bed property has risen by 10.6% year-on-year, triple the growth rate of one-bed homes, at 3.7%.

Last month it cost £144 or 16% more a month to move from a one-bed to a two-bed property, more than double the gap (£68 or 8%) in October 2018.

Squeezed supply is behind rising rents, as there are 47% fewer homes available to rent than at the same time in 2020.

Beveridge said: “The desire for space has been the property trend of the pandemic. While smaller city properties have fallen out of fashion, larger family homes have been in high demand.

“But with rents on larger homes currently rising at twice the rate of smaller properties, it is now more costly for tenants to trade up than ever before.

“The pandemic has marked the first time that we’ve seen such a big divergence in rental growth by property size.

“Usually, rental growth remains fairly uniform no matter how large the home is, but over the last year the gap between rental growth on smaller and larger properties has widened to around 5%.

“But as more tenants make their return to city centres, many seeking smaller properties, it’s likely that the gap will begin to shrink in the new year.”

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