London's average asking rents are at an all-time high of £2,093 per month following a record year-on-year price increase, new Rightmove data has revealed.
The year following April 2016 witnessed a big growth in rental properties coming to the market, but this growth in supply has dwindled over the past two years.
In the capital, available rental properties are down 33% since the start of 2017, while outside of London they are down 13%.
Following a few years of slowing and dropping rents in the capital, asking rents in London are now climbing fast again, up 8.2% on the first quarter of last year, the highest annual rate since Rightmove started recording these figures back in 2012. The first quarter of 2019 was also the second consecutive quarter to see average asking rents in the capital hitting a record high.
“There was a temporary slowing and drop in rents in London when the second home stamp duty tax came in back in 2016 as so many investors bought properties before this came in, leading to a huge increase in rental choice,” Miles Shipside, Rightmove's commercial director, said.
“But the lack of new stock since that time has led to rents increasing again, and London renters are now faced with rents that are over 8% higher than this time last year. Outside London, the pattern is not as extreme, but there is still a significant drop in fresh choice.”
Away from London, the North East is the only region to have witnessed a fall in rents over the past 12 months (down by 0.3%). Scotland, meanwhile, has witnessed the biggest year-on-year rise in asking rents, up by 6.7%, while the South East has the highest average asking rents outside of London, with the average rental home costing £1,054 per month.
“Suffice to say the government’s introduction of higher stamp duty on second homes purchases back in 2016 combined with other tax increases has resulted in an ongoing trend of decreasing activity from investors in the buy-to-let market,” Shipside added. “Consequently, we’re seeing the initial price drops being replaced by rapid price growth in some areas.”
Rightmove also analysed the impact of the upcoming ban on tenant fees, which comes into force in England on June 1 this year. The Tenant Fees Act 2019 will see the government ban letting fees paid by tenants in the private rented sector as well as capping tenancy deposits.
Based on a five-week deposit cap, Rightmove has calculated that the cheapest deposits outside of London will be in the North East, at £630 per property on average, while the most expensive will be in London at £2,415 per property.
In the capital, the cheapest deposit on offer will be in Rainham (£1,216), with the most expensive in Kensington (£4,065).
“The upcoming tenant fee ban should spell some good news for tenants and it may lead to more people being able to move more often if they want to, thanks to the reduction in the cost of moving,” Shipside continued. “It remains to be seen if the ban will be passed on in other ways such as increasing rents and tenants will still need to find a pretty hefty rental deposit in many areas.”
“What we really need now is fresher stock for the rental market so that rents don’t continue to rise at the current rate we’re seeing, so perhaps it’s a good time for some investors to consider buying up properties to let out as the tenant demand is definitely there.”
Richard Davies, head of lettings at historic London agency Chestertons, said Chesterstons' own figures back up Rightmove's findings, with the number of available rental properties down in the majority of the firm's branches and rents starting to rise again as a result of the supply and demand imbalance.
“The government’s decision to taper and ultimately remove tax relief on finance-related costs has had a huge impact on the lettings market and has resulted in a massive decline in the number of new lettings properties coming to the market,” Davies said. “This decline has been most noticeable over the past six months as landlords take action before the full impact of the tax changes come into play next year.”
He added: “The area where this imbalance is most pronounced is South West London, where not only are the number of available rental properties down by 30% compared to this time last year, but the number of tenants has increased by a massive 48%, pushing rents up by around 9%.”