The impact of the Covid-19 pandemic has led to a rise in city centre rental stock and dropping asking rents, according to Rightmove.
The portal's latest quarterly rental trends tracker suggests that many urban tenants are rethinking where they want to live and looking for properties outside of the cities in which they currently reside.
In all of the UK's 10 biggest cities, there has been a shift in the number of tenants enquiring about properties outside of that city. Rightmove says this is driven by the need for more space as lockdown restrictions continue, as well as the quest for a quieter life.
The biggest changes have been recorded in inner London and Edinburgh, where 53% and 37% of resident tenants have enquired about a property outside of the respective cities. In 2019, the figure was 45% in London and 29% in Edinburgh.
Rightmove reports that in five of the UK's largest cities, stock levels are at least double what they were this time last year. Meanwhile, on a national basis, available stock is down just 9% compared to the same time in 2020.
Asking rents in the capital are now 6.4% lower than they were in Q4 2019, driven by a 12.4% plummet recorded in inner London.
Another headache for landlords and property investors is the impact Brexit will have on tenant demand.
According to research from Goodlord, there has been a steady decline of EU tenants signing leases over the last four years. From January 2017 to November 2020 (inclusive), the proportion of EU renters in England fell from 20% to 14% of all tenants.
Despite a glut of stock in some cities, asking rents are still rising in Bristol (+2%) and Liverpool (+2%), while the national average for rental growth sits at 3.7%, Rightmove reports.
Meanwhile, the number of prospective tenants contacting agents on an annual basis is up 27% compared to January 2020.
Average asking rents outside London are at a new record of £972 per month, while Q4 2020 was the first time Rightmove has recorded an increase in typical asking rents in the final three months of a year since it started recording data in 2011.
"The price premium that many tenants are usually willing to pay to have the vibrancy of a city centre on their doorstep has been tempered for now," says Tim Bannister, Rightmove's director of property data.
"There’s no doubt that higher rents will return once life goes back to some form of normality, but it will be the city centre properties with gardens and balconies that will be able to command the biggest premiums."
"Outside city centres it’s a very different picture, with agents reporting extremely busy markets and rising rents. Available stock is lower than the usual level we would see at this time of year, and demand is higher, leading to a much better outlook for those landlords in the suburbs and in smaller towns and villages," he says.
London letting agent Marc von Grundherr, Director of Benham and Reeves, adds that many tenants aren't 'committing' to the high cost of renting in central London.
"Demand has fallen dramatically causing rental stock to flood the market. This excess level of stock means that landlords are being forced to accept dramatically lower levels of rent just to avoid lengthy void periods."
Von Grundherr says that after a 'sluggish' start in some locations such as Canary Wharf, his firm has had to redirect resources from quieter locations to its busiest outer London branches in Ealing, Kew, Hampstead and Beauford Park.