The impact of lockdowns across the world on both the number of tourists and corporate relocations into the UK has resulted in some landlords choosing to move their short-term rental properties back into the long-term rental market, according to the latest (July 2020) Hamptons International Monthly Lettings Index. This trend has mainly been concentrated in Inner London and is one of the biggest factors leading to record rent falls in the capital.
Between the lifting of lockdown in late May and the end of July, almost one in eight (12%) homes that came onto the rental market in Zone 1 had previously been let on a short-term basis. This percentage get smaller the further out of London the property was, with Zone 2 seeing a -9.3% reduction, Zone 3 (-4.6%), Zone 4 (-1.3%), Zone 5 (-1.0%) and just a -0.7% reduction in short-term lets in Zone 6. Across London as a whole, the figure stood at 5.1% over the same period.
Hamptons estimates that 37% of homes in London that had previously been advertised on a short let basis are now being offered for long-term occupation. However, landlords switching their property from a short to a long-term let are likely to see a significant reduction in rent. On average the change means a 35% reduction in rent, equating to £1,952 a month less for homes in Central London.
Homes previously let on a short-term basis have contributed to the increasing number of overall properties available to rent in the capital. In July there were 26% more rental homes available in London than at the same time last year. Indeed London was the only region in Great Britain to record a year-on-year increase in the number of rental homes on the market. Almost all this increase took place in Inner London where the number of homes available to rent rose 42% on last year.
The shift from the short let to the long let market is almost exclusively London driven. Of the 20 local authorities with the highest share of short lets being offered on the long-term rental market, 16 were in the capital, suggesting rural and coastal short let markets are performing more strongly.
Lambeth tops the list, where nearly one in five homes (17%) coming onto the rental market had previously been let on a short-term basis. The Vale of White Horse in Oxfordshire is the first local authority outside of the capital to appear on the list, with 3.6% of instructions previously listed as a short let.
Rental growth on newly let properties
Rents in Great Britain remained flat in July, according to Hamptons. Last month, the average cost of a newly let property in Great Britain fell slightly to £1,001pm, 0.1% lower than the same month last year. However, this is a slight improvement on the 0.7% year-on-year fall recorded in June.
Once again, rental growth is being dragged down by rent falls in London, the South East and East of England. Rents in London fell -4.2% year-on-year in July, driven by a -8.4% decrease in Inner London. Meanwhile, in Outer London, rents fell -2.9% compared with the same period last year, a slight improvement from the -3.6% fall recorded the previous month.
However, outside of London and its immediate neighbouring regions, rents continued to rise. The South West saw the biggest rental increase – average rents here rose 2.8% year-on-year in July. The Midlands followed with 2.3% annual rental growth.
Commenting on the figures, Aneisha Beveridge, head of research at Hamptons International, said: “For years there had been a steady stream of landlords moving from the long to the short let market in search of higher returns. However, following lockdown and in the two months since late May, this shift has been completely reversed with growing numbers of landlords looking to secure longer-term tenants.
“This is particularly evident in urban tourist and corporate relocation hotspots, nowhere more so than central London. And with three-quarters of landlords who have secured a long-term tenant signing 12 month or longer contracts, they are unlikely to return to the short let market any time soon. However, the rising popularity of staycations has meant that rural and coastal areas have kept the short-let market outside of urban areas more buoyant.
“The gap between what’s happening in the rental market in Inner London compared with the rest of the country has widened. While affordability pressures weigh on rental markets across the country, the lack of stock available is softening the blow.
“Across Great Britain there were 7% fewer homes available to rent last month compared with the same period last year. However, the opposite is true in Inner London, where the increase in the number of short lets that moved to the long-term rental market drove a 42% annual increase in stock levels and consequently led to a record 8.4% fall in rents.”