ground rent flat

City centre flats are seeing hefty rent rises as demand swells

Smaller properties have driven rental growth recently, with city centre flats increasing in value faster than larger homes in the UK.

A reduction in the number of city centre flats available to rent has driven rent rises in this part of the sector, as tenants compete to secure homes in some areas, according to the latest figures from Hamptons.

At the same time, an increase in the amount of stock available for larger homes and more suburban and rural locations has dampened rental price growth in this area, as tenants are finding a greater range of homes to choose from.

This heightened demand for city centre flats among tenants is in part down to the ongoing return to the office – and ‘normality’ – after Covid, with many renters deciding they still want to enjoy the convenience and buzz of living in a city centre.

City centre flats harder to come by

Anecdotally, many landlords and agents are reporting unprecedented demand when they list property available to rent in a city, including the capital.

On Landlord Today, one landlord commented: “I’ve recently advertised a one bedroom flat in London. I have had over 170 viewing requests in a very short time – on two websites. Open Rent paused my advert otherwise I would have had a lot more.”

Overall across all markets and property types, renters are now paying an average 8.3% more than they were 12 months ago, according to Hamptons research. Rents are now 15.7% higher than they were at the very beginning of the pandemic.

The figures released in July’s report show the sixth strongest annual increase recorded over the past decade, and as the paper notes, this has been driven by a major recovery in rents across city centre flats, after demand dipped during the height of the pandemic.

London’s racing rents

Honing in on one-bedroom city centre flats, rents have risen by an average of 10.4% over the past 12 months, meaning they now cost 13.6% more to rent than they did at the start of the pandemic.

Comparing this to a four-bedroom rental home, the year-on-year growth recorded by Hamptons was 6.6%, with an overall rise since pre-Covid of 17.6%, demonstrating the slowdown.

In London, despite being the most sluggish recently in terms of house price rises, rents are soaring at a rapid rate. In the inner parts, rents are up by a huge 33.6% compared with 12 months ago – by far the fastest growth rate seen across the country.

However, as Hamptons notes, the market is showing recovery after a major trough seen in some parts during the pandemic, meaning many see it more as a market correction than a significant sign of any major changes in the rental sector.

Average rents, in fact, are just 1.5% above what they were in January 2020, and rental growth is on a par with what it was in July 2016.

Low stock levels driving prices

Behind London’s steep rental rise is the dearth of available properties to rent, including city centre flats. The number of properties listed is down by 37% in the capital compared with one year ago.

Across the UK as a whole, stock levels were down by 9% in July compared with the previous year, while there are 52% less properties available to rent now than there were two years ago.

Aneisha Beveridge, head of research at Hamptons, says: “There are some signs that the rental stock slump is close to bottoming out. But with two-thirds fewer homes on the market than five years ago, there isn’t room for them to fall much further.

“In a reversal of last year, it’s city centre markets which have seen the biggest year-on-year falls in the number of homes up for rent, meaning it’s here that tenants are still facing double-digit rental growth. Meanwhile suburban and country markets have quietly recorded small rises in stock levels and have seen rental growth soften.”

Self-certified Sophisticated Investor

Please read

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

I am a self-certified sophisticated investor because at least one of the following applies:

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

High Net Worth Investor

Please read

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

STAY AHEAD OF THE MARKET

Sign up for first access to new developments and exclusive property investment opportunities.

We send limited and targeted emails on new launches and exclusive deals which best fit your areas. We are trusted by over 30,000 active buyers as their source for new stock.

  • New property developments
  • Professional market reports
  • Property deal alerts
  • Development updates
Manchester property investment

FIRST FOR NEWS AND KNOWLEDGE.

Receive trending news straight to your inbox and stay up to date on all of the property market trends and advice.

Established since 2005 we are a leading voice of authority and commentary on the UK property market. Our news is trusted by Apple News & Google News.

  • UK housing market
  • Mortgage & money
  • Buy-to-let landlords
  • Guides & advice

Talk to us

Speak to our UK property experts today:

 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

 

+852 6699 9008

Open from 9am-6pm HKT