Rents in other UK cities are growing faster than both London and the UK average as workers relocate from the capital amid rising living costs.

That’s according to the third edition of the National Rent Review by buy-to-let lender Landbay, supported by rental analytics from MIAC.  

The national picture

UK rents rose by 0.03% in November 2018 which, although the lowest monthly rise since the beginning of the study, adds to the growth of 0.97% in the year and is 0.04% higher than the same period in 2017. This is mostly down to London’s improved performance – a growth of 0.58% this year.

The average monthly UK rent currently sits at £1,212, a rise of £10 since the start of the year. Excluding London, rents sit at £769 since the beginning of 2018.

Rents are rising in 27 of the 33 London boroughs – a very different picture from this time last year when rents were falling in 26 of the capital’s boroughs. Although every UK region has seen rising rents, the speed of growth has not been consistent, with all areas experiencing a slowdown apart from London.

The areas that have seen the most substantial growth in the past year are the East Midlands (2.25%), Yorkshire & Humber (1.50%) and the West Midlands (1.48%), and all regions are expected to climb further into 2019.

Meanwhile, growth in the North East peaked to its highest point in two years in November 2017 but since then, growth has depreciated to 0.05% on an annual basis – its lowest growth rate since August 2013.

“It’s hard to escape the fact that we’ve seen a slowdown in the property market due to Brexit uncertainty and recent tax and regulatory changes for landlords,” John Goodall, chief executive officer and co-founder of Landbay, said.

He said that these growth figures show just how resilient property continues to be as an asset class.

“As with all investments, it is advisable to have a diversified portfolio, backed up in the case of buy-to-let by London’s recent fall and revival alongside strong performances from cities including Leeds and Manchester,” he added.

“London’s green shoots paint a positive picture for landlords ahead of what will likely be testing economic times with Brexit and further interest rate rises expected.”

The ‘regional revolution’

While London’s rental growth stands at 0.58% year-on-year, cities like Leeds (2.54%), Birmingham (2.05%) and Manchester (1.91%) are now experiencing accelerated annual growth.

This could be down to internal migration, as – according to Landbay’s findings – millennials are leaving the capital at the highest rate in almost a decade. In fact, since the start of 2012, London has witnessed a net loss of nearly half a million residents as people ‘vote with their feet’ amid the growing living and housing costs.

However, some will also be moving due to work commitments. MediaCityUK now employs more than 3,000 people at its base in Salford, after welcoming 2,300 BBC employees back in 2010. The area has seen rents rise by 2.62% year-on-year and 22.76% cumulatively since January 2012 – more than double London’s pace (9%).

What’s more, HSBC has announced it will move 1,000 jobs to Birmingham, while Leeds has seen jobs created by companies including Burberry.

Goodall added: “The truth is there is now a twin speed rental market as London’s rent growth is dwarfed by cities such as Leeds and Manchester. This is being fuelled by the capital’s millennial exodus as countless young professionals realise there is more to life than London.”

“This same message carries weight with landlords, who are increasingly seeing the value of investing in these regional hubs.”

He concluded: “In many ways, it could be argued that the ‘Northern Powerhouse’ is beginning to take effect amid stretched affordability and a harsher tax regime.”