The resumption of office life and global travel has meant that for the first time since January 2020, rents in Inner London have returned to growth. In November, rents in London’s 13 Inner boroughs rose 3.9% when compared to the same month last year, rising to average £2,329pm, up from -0.1% in October.
Since the start of the pandemic, rents in Inner London have been falling. They bottomed out in April 2021 when they were down 22.1% annually. However, last month, Inner London’s rental market was boosted by a 14% annual rise in the number of applicants looking to rent.
Not all of these applicants are likely to find a home to rent however as there were 71% fewer homes to rent in November this year than there were a year earlier. Last year the rental market was flooded with short-let properties that had been brought onto the long-term rental market at the start of the pandemic.
November also marked the first time in 20 months that the rate of Inner London rental growth caught up with Outer London, where rents have been rising for the last 15 months. A change in working patterns since the pandemic began has driven tenants to seek more space, boosting rents in the suburbs, while suppressing demand for inner-city living.
Despite positive annual growth, it still costs less to rent a home in Inner London than it did on the eve of the pandemic. The average home in Inner London cost 11.6% or £305pm less than it did in January 2020.
Hamptons reported: ‘We estimate that the pandemic has cost Inner London landlords £2.9bn in lost rent over the last 22 months. While Inner London is the only region where rents are lower today than they were in January 2020, they are picking up pace. We expect Inner London rents to recover to pre-pandemic times by the middle of next year.
‘A slow start to Inner London’s recovery has meant that rents outside the capital have risen nearly three times faster than those in London since the pandemic began. Across Greater London, rents have risen 5.9% since January 2020, but outside London rents have increased by 16.1%.
‘Nationally, the South West has seen the strongest rental growth since the pandemic began, with rents up 23.5% (or £195pm) since January 2020. Having recorded eight consecutive months of double-digit growth, the South West continues to top the rental growth league with rents rising 14.6% over the last year. Here, there were 42% more applicants looking to rent and 21% fewer homes available in November than at the same time last year.’
Commenting Aneisha Beveridge, head of research at Hamptons, said: “Across Great Britain, rents have risen 7.9% over the last year, marking the strongest rental growth recorded in any November since our records began in 2013. A lack of stock and a continuation in tenants’ willingness to pay for more space has fuelled growth. In particular, this has benefitted Southern regions (outside of London) which have seen the biggest rent rises since the pandemic began.
“While there are few signs to suggest that stock levels will rise next year, we expect the rapid pace of rental growth to slow as affordability barriers set in and household budgets come under further pressure. We expect rents across Great Britain to rise 2.5% in Q4 2022.
“The pandemic has divided London into a city of two-halves. Rents in Inner London have been hardest hit as the rise of flexible working has seen fewer new tenants move into the capital, while some tenants have moved to leafier neighbourhoods in search of more space. But the resumption of office life and the opening of the global travel marked a turning point for the rental market in November.
“While there’s still a way to go, rents in Inner London are on track to reach pre-pandemic levels by the middle of 2022. This means, in a reversal of this year, we’re likely to see Inner London rents outperform Outer London in 2022.”
EU tenants want a one-bed flat in Marylebone
According to London Central Portfolio (LCP), the EU represented the largest share of new tenants in Inner London in Q3 2021 at 36%. As travel restrictions started to lift, prime London became less reliant on UK renters, with 20% of new tenants in Q3 2021 coming from the UK in comparison with 42% in Q3 2020.
Marylebone was the ‘hotspot’ during Q3 2021 with nearly 40% of enquiries for properties in this area. Also, one-bedroom properties were in particularly high demand during Q3 2021, with over 50% of enquiries for these smaller apartments.
LCP added: ‘Tenants now prefer close access to green open spaces in addition to restaurants, shops and a short daily commute. Marylebone, with its central location, proximity to Royal Parks and thriving High Street delivers this balance.’
