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According to official data, a stagnant rental market in London is holding back a rise in rents across the rest of the country. Read on for the Guild rent digest for September 2021.
Landlords in the capital have had a torrid time as furloughed workers and those working remotely have stayed away during the coronavirus pandemic. Their absence has seen homes left standing empty, and rents fall. In September, London was the only region in the country where rents dropped – by 0.3 per cent over the year, says the Office for National Statistics (ONS).
Property portal Rightmove paints a slightly different picture but agrees tenants are finally moving back to cities and claims rents have risen in London for the first time since lockdown started. The ONS report shows rent increases have remained steady over the past year.
In August 2020, the annual rent rise was 1.5 per cent. Fast forward 12 months and the annual rise is 1.3 per cent, with zero change since May.
"Since November 2020, private rental price growth in London has slowed. London's rental price growth in September 2021 is lower than any other English region," says the ONS Index of Private Housing Rental Prices for September.
"This reflects a decrease in demand, partly because of the adaptation of remote working, meaning that workers no longer need to be close to their offices. It also reflects an increase in supply, such as an excess supply of rental properties as short-term lets change to long-term lets."
Rightmove data looks at asking rents on the website. For Q3 2021, the data shows average asking rents are £1,047 a month across the UK – a quarterly change of 3.9 per cent and an annual rise of 8.6 per cent. Tenants boomeranging back to the city has led to heady rental growth in some of Great Britain's biggest city centres.
Rightmove says some city centres have not only bounced back from the declines recorded during the year since the pandemic started, hitting double-digit growth and outpacing the national average.
"Across Britain, rents are rising at the fastest rate ever recorded by Rightmove, now up 8.6% annually outside London, and the capital is finally showing signs of growth, with rents up by 2.7% on a year ago," says the research.
"In Birmingham city centre rents fell by 5% between February 2020 and February 2021, but by September this year, the increased demand helped them to grow to 10% higher than pre-pandemic levels.
"It is a similar picture in Nottingham city centre where rents fell 2%, and have grown to 11% higher than before the pandemic.
"Edinburgh city centre has seen rents grow by £100 since February of this year, but they still trail by 5% when compared with February 2020."
The ONS rent change by country for the year ending September 2021 are:
Despite the rent drop in London, landlords in every other region have seen rents rise, led by a 2.7 per cent increase in the South West and East Midlands. Besides London, the worst-performing region is the North East, with a 1.6 per cent rent increase.
For landlords confused by the stats and what they mean, here are answers to the most asked questions about rents.
Check the data carefully. Different indices cover different periods, and the samples vary between reports. The ONS has the most extensive sample, so the most reliable figures should return, but the time to collect and analyse the statistics often means the ONS data lags behind the rest of the sector. ARLA derives insights from letting agents and provides what's known in the trade as a sentiment survey rather than factual data. Homelet statistics come from customer data, which may not fully reflect the market.
That's a business decision for landlords. The rent statistics indicate how the market moves but do not reflect demand from tenants and property standards in local neighbourhoods. Don't forget that the data is historical, showing what's happened rather than what will happen.
That's up to individual landlords. For instance, one index with a solid customer base in the same area as a landlord's portfolio may align more closely with market rents for that neighbourhood. Average data is not good if you don't have an average home, and median rents will cover everything from a room in a shared house to a four-bedroom home.
Extra research with local letting agents is likely to indicate better where a landlord should pitch a competitive rent and stop them from underselling.
Although several letting agents and property organisations publish regular rent statistics, many have been affected by the coronavirus lockdown that has their reports suspended or delayed.