London rents are 3% higher than before the pandemic, signalling that the market has recovered from the pandemic downturn, Rightmove’s quarterly rental trends tracker has found.
The cost of renting in the capital has risen by 6.1% in the past quarter alone, reversing an annual drop of 6.4% during the end of 2020.
Back then tenants looked for more space outside of cities, flats temporarily fell out favour, and landlords offered tenants willing to stay cut-price rents.
However following the city’s recovery annual growth has reached 10.9%, bringing the cost of asking rents to £2,142 per month.
Richard Davies, head of lettings at Chestertons, said: “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.”
Rents grow at fastest ever rate
Asking rents are rising at the fastest rate ever recorded, by 9.9% to £1,068 across Britain.
Wales (+12.7%), the North West (+12.5%) and the South West (+11%) lead the way in terms of growth, followed by London (10.9%).
Rental growth now exceeds house price growth in every region, barring the East Midlands, South West and South East.
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%).
The average yield across Great Britain reached 5.5%, which is the highest since 2016.
The North East & Wales have hit record yields, while returns 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.
Squeeze on available rental homes
The imbalance of strong tenant demand and low rental stock is supporting asking rent rises, as competition between tenants for the rental properties has near doubled (+94%).
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%).