Record rents outside London & demand shift creates challenge for smaller flats
- Asking rents have hit a record outside London to £964 per month, driven by record demand from renters
- London is only region where rents are falling, down 6.8% in Inner London, while Outer London is up by 0.8%
- Two bedroom houses have replaced studio flats as the most in demand property type, as post-lockdown renters look for a spare room to work from home
- Total rental stock is up by 20% compared to this time last year, though available stock is up by just 2% nationally, but up by 80% in London:
- Outside London, increased demand has led to available stock of two bed houses now 46% lower than this time last year, while studio flats are up by 11%
- In London, available stock of two bed houses is up by 2%, while studio flats have doubled (+100%)
Asking rents outside London have been driven to a new high, fuelled by record demand from tenants, and by strong price growth in the South West and northern regions. Asking rents are up 4% in the South West and up at least 3% in the North East (+3.3%), North West (+3.1%) and Yorkshire & the Humber (+3.0%). The trend we reported last quarter of London rents weakening has continued over the past three months, with prices now 3% lower than Q3 2019 in the capital, down 6.8% in Inner London and up just 0.8% in Outer London.
Shift from studios
In September last year the most in demand property type was a studio flat, followed by a two bedroom house. This September, not only have two bedroom houses overtaken studio flats as the most in demand, studio flats have fallen seven places, behind bungalows and houses as renters look for spare rooms to set up spaces to work from home.
|Most in demand property type
|Most in demand property type
|1||Two bedroom house||Studio flat|
|2||Two bedroom bungalow||Two bedroom house|
|3||Three bedroom house||One bedroom house|
|4||Three bedroom bungalow||One bedroom flat|
|5||One bedroom house||Three bedroom house|
|6||Four bedroom house||Two bedroom bungalow|
|7||One bedroom flat||Two bedroom flat|
|8||Studio flat||Three bedroom bungalow|
|9||Two bedroom flat||Four bedroom house|
|10||Five bedroom house||Three bedroom flat|
More available stock in London drives rents down
Prospective tenants will find 20% more properties in total than in September last year nationally, but available stock is only up by 2% so they will still find strong competition, especially for houses. It is a different story in the capital, where available stock is up by 80% on last September.
Available stock of the most in demand property type, two bedroom houses, is down 46% outside London and up just 2% in London. There are now 11% more studio flats available outside London, while in the capital, available stock of studio flats has doubled, up 100%.
Asking rents have been falling since the beginning of lockdown in London, and are now an average of £110 per month lower than back on 23rd March at the start of lockdown. Looking at property types in London, asking rents of studio flats are 3.5% lower than this time last year, one bedroom flats are down by 3%, and two bedroom flats are down 4%. Two bedroom houses are faring better, up by 0.7%.
Rightmove’s Commercial Director and Housing Market Analyst Miles Shipside said: “Landlords with a large portfolio of studio flats may find they need to accept lower rents than over the past few years, although let’s not forget that overall rents have gone up by £100 per month outside London and £140 in the capital over the past five years so those with a longer term view will still be able to make some good returns. It will be the accidental landlords that have one property that need a good agent more than ever, to promote the attractive attributes of their buy-to-lets. I’ve heard from some agents that they’re now advising their landlords to turn part of the living room into a work from home space, or offering to install high-speed broadband for tenants as an added incentive. The rise in demand for properties that have more space and that typically have higher rents is helping push up average rents to new record highs.”
Michael Cook, National Lettings MD at LRG, comments: “We’ve moved more customers this September than any month previously, which is largely due to pent-up demand from tenants. As some of the restrictions imposed during the pandemic began to lift, there was a documented surge in enquiries from renters who were restricted from moving over the spring. Changes to stamp duty also saw some investors take advantage of reduced acquisition costs of new properties and an increase in buy-to-let purchases. However, we’re still seeing a gap in supply and demand and the need for more homes – many thousands more homes in the Private Rented Sector – is clear. At the same time, COVID has changed tenant priorities, with many now wanting bigger homes with gardens and a separate space to work in, and this now comes at a premium. Demand for rental stock outside of London has outpaced that shown in the capital with a requirement for more home working space and gardens and a reduction in the need to be in such close proximately to the office, with more flexible homeworking being offered by employers. We’ve also seen houses increase in demand over flats with people looking to rent properties for longer, increasing average tenancy lengths.”