Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Two-speed rental market as London falls, regions rise

Rental growth

Rental growth in the UK rose 2.2%, while London fell 1.4%, with inner London – in particular – seeing negative rental growth

A two-speed rental market is emerging from the coronavirus lockdown as London is seeing demand and rents fall sharply while the rest of the UK is seeing steady rises.

According to the Hometrack rental index for the second quarter of 2020, rental growth in the UK, excluding London, is up 2.2 per cent with the capital seeing a 1.4 per cent fall in the year.

However research from Zoopla, which owns Hometrack, expects annual rental growth in the UK outside London to slow to one per cent by the end of the year, with an annual decline in London of up to five per cent by the end of 2020.

Rental growth across the regions and countries has been positive, ranging from 1.5 per cent in the West Midlands to 3.1 per cent in Wales, supported by pent up demand for rented housing.

However, a contrast is emerging in London, with rising supply and weaker demand – particularly in inner London – resulting in negative rental growth. Average rents in London have fallen by three per cent over 2020 H1 illustrating the severity of the trend.

Hometrack noted the decline in international travel and tourism had seen landlords in the capital, especially in central London, shifting away from short lets, thereby increasing supply in the long let market.

Weaker demand means that as tenancies end, they are being absorbed more slowly, compounding the growth in supply, it said.

Hometrack said, the rise of home-working at many firms, with a slow return to offices over the rest of the year, signal that demand for rental property is likely to remain subdued, especially if unemployment starts to rise.

Commuting data shows that working patterns in London are still far from returning to levels seen back in March, it added.

Hometrack also noted that Edinburgh was also seeing a slowing market as rents grew 0.2 per cent over the year due to reduced tourism and policy changes impacting landlords and the supply of property.

Elsewhere, rental demand was more resilient, with renters like homeowners, potentially using lockdown as a chance to reassess how and where they are living.

However, the number of homes for rent has increased since lockdown ended and is now slightly ahead of seasonal trends, with the volume of homes for rent nationally up seven per cent on this time last year.

As this gap between demand and supply continues to narrow through Q3 and Q4, rental growth will start to slow as tenants benefit from a wider array of properties to choose from, Hometrack added.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.