Asking rents for London properties hit a record high at the end of 2018, exceeding the previous peak witnessed in the first quarter of 2016.
That’s according to research carried out by Rightmove, which revealed that asking rents in the capital are now increasing at an annual rate not seen since Q1 2015.
It also found that, compared with this time last year, available rental stock in London is down 22% - with this supply-demand imbalance helping to drive up rental prices.
Outside of London, meanwhile, there are 10% fewer rental properties nationally marked available compared to this time last year.
In the year to come, Rightmove expects asking rents to rise by 4% in London, and 3% outside London – even allowing for the uncertainty being caused by Brexit.
Away from the capital, the commuter town of Hertford witnessed the largest rise in demand from tenants in 2018, while East Ham saw the biggest increase in demand in London itself.
While the flood of rental properties brought to the market in London between 2016 and 2017 restrained rental prices for a few years - with asking rents dropping to and staying under £2,000 per month for nearly three years - the subsequent drop in buy-to-let activity (caused by extra regulation and taxation) and increased demand from tenants has changed matters.
The conditions of the market led to a lack of choice for tenants and rents rising to a new record of £2,034 per month, surpassing the high of 2016.
“The increasing rents in London reflect that demand has been exceeding supply over the past year,” Miles Shipside, Rightmove’s commercial director, commented.
“When the Government introduced higher stamp duty on second home purchases back in 2016, it deterred many landlords from investing in the buy-to-let market, which in turn has exacerbated this ongoing dearth of available properties, and we’re yet to see any significant boost in stock from the many build-to-rent programmes. In addition, the more punitive treatment of tax reliefs has meant some landlords are also exiting.”
Outside of the capital, it’s locations in the North West that have seen the largest growth in tenant demand, with six towns from the region making the top 10.
After Hertford, which witnessed the greatest demand, the rest of the top five was made up by Bootle, Bracknell, Winsford and Prenton.
In the capital, meanwhile, East London has been experiencing the biggest demand from tenants. As well as East Ham, the top five included Forest Gate, Biggin Hill, Elephant and Castle, and Chadwell Heath.
When it comes to the London areas where asking rents have increased the most, Hayes, Notting Hill, Hammersmith, Canary Wharf and Highgate made up the top five, while in the rest of the UK the top five spots went to Newbury, Swansea, Dundee, Dudley and Hinckley.
“We forecast that average asking rents will continue to slowly strengthen further in 2019, by perhaps 3% outside London,” Shipside said. “In the capital there are no signs of an increase in buy-to-let activity, which may lead to asking rents growing further by around 4%.”
He added: “A mutually beneficial plan for both buy-to-let landlords and tenants is to strike up a genuine rapport. It eases landlords’ concerns if they have a tenant in situ for several years, while a tenant with a good relationship with their landlord will stand a better chance of negotiating more favourable rents.”