A decline in rents in some of the UK’s biggest cities is becoming “entrenched” as tenant demand shifts from city centre flats to larger homes in surrounding boroughs within commutable distance, research has found.
Rents fell last year by 8.3 per cent in Greater London, the steepest annual fall since the financial crisis of 2008, according to a report published this week by property website Zoopla. Rents also fell in Manchester, Birmingham, Edinburgh and Aberdeen, albeit by smaller margins.
Zoopla said demand for city centre properties had fallen during the first lockdown as travel restrictions hit the market for short-term tourist or corporate rentals. The trend was reinforced by the shift to homeworking, which saw workers relocate to areas where they could afford larger homes or those with outside space.
“This has put particular downward pressure on rents in central London, where the rental market is more dense,” Zoopla said. Rents in the City of London and Kensington & Chelsea fell by 17.3 per cent and 12.3 per cent respectively last year.
The picture was the reverse in outlying boroughs, where it identified a “halo” effect of rising demand and rents. In central Birmingham, for instance, rents dropped by 3.4 per cent in 2020 but rose by an average 5.3 per cent in the neighbouring boroughs of Bromsgrove, Sandwell and Wolverhampton.
Across the UK — excluding London — rents rose by 2.3 per cent in the year, with a 1.4 per cent rise in the last three months of 2020.
The “race for space” was underlined by data on the time taken to rent out different types of property. In London, flats took nearly 20 per cent longer to rent out in the fourth quarter of 2020 than in the same period in 2019; while the time taken to rent houses in the capital fell by over 10 per cent. A similar effect was identified in Edinburgh and Leeds, while across the UK it took an average of 30 per cent less time to let a house in the fourth quarter of 2020 than in 2019.
Separate research by the Royal Institution of Chartered Surveyors (Rics) suggested rents would continue to grow across the UK over the next three months. The monthly survey of surveyors and estate agents published this week reported a balance of 12 per cent of respondents expecting rents to rise over the period.
In London, however, a balance of 43 per cent of respondents anticipated the fall in rents to continue.
New instructions by landlords fell for the second quarter in a row in the Rics data, a trend which has coincided with a tougher tax and regulatory climate for property investors.
Simon Rubinsohn, Rics chief economist, said: “Renewed concerns are evident regarding the supply of properties in the rental market. Changes in the regulatory framework as well as the tax regime are frequently cited as drivers of this trend, which is widely seen as pushing rents higher in most parts of the country despite current affordability concerns.”