Average rents across the UK dipped by -0.3% in June, and by -0.8% in Q2, taking the annual growth in UK rents to +1.1%, down from +1.7% a year ago, according to the latest findings of the quarterly Rental Market Report by Zoopla. However, a two-speed market has emerged between London and the rest of the UK the firm added.
Rental growth in the UK excluding London is up +2.2%, as demand continues to outstrip supply in many markets. By contrast, a different trend is emerging in London, with rising supply and weaker demand - particularly in inner London - resulting in negative rental growth. Edinburgh has also seen a marked slowdown in rental growth to +0.2% over the past year as a result of reduced tourism and policy changes impacting landlords and the supply of property.
Challenging market conditions in London and Edinburgh
The rental markets of London and Edinburgh stand apart from other UK cities; a rise in supply in these markets, which is increasing choice for renters, is not being matched by similar levels of demand, leading to downward pressure on rents and the rate of rental growth, says Zoopla.
The firm reported: “Several Covid-related factors have resulted in rising supply in London - in particular in central and inner zones. The decline in international travel and tourism has seen landlords in the capital, especially in central London, shifting away from short-term lets, thereby increasing supply in the long-terrm let market. Weaker demand means that as tenancies end, they are being absorbed more slowly, compounding the growth in supply.
“The rise of homeworking at many firms, with a slow return to offices (expected) over the rest of the year, signals 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. In addition, the student influx expected as part of the usual seasonal busy period in late summer may not be as large this year, as universities migrate towards more online learning.
