London rents are rising at a record pace with growth being driven by renters returning from outside the capital. As the threat of Covid recedes, life in the capital is slowly returning to its new normal. Over the last 12 months, rents in London have risen by 12.3%, the fastest rate since the Hamptons Lettings Index began in 2013. It is also the second successive month that rental growth in the capital has outpaced the GB average reversing 26 consecutive months of London rents lagging behind the rest of the country.
The current pace of London rental growth is predominantly down to the capital playing catch up with the rest of the country. Today, the average rent in London stands 103% above the average outside the capital. While this gap is up from 96% a year ago, it remains below the 120-130% pre-Covid premium which has been eroded by strong rental growth outside the capital in recent years. But the current pace of rental growth in London is likely to push the premium closer to its pre-Covid level inside two years.
So far in 2022, nearly one third (30%) of all new tenancies in the capital have been secured by someone moving from outside of London. This marks a sharp rebound from 2020 when just 12% of London tenants came from outside the capital – a time when many renters left the city to move back in with parents or rent in a more affordable area. It is also the highest figure in at least a decade and compares to a five-year pre-Covid average of 23%. Inner London has become home to the majority (65%) of these movers this year, up from a more normal 50/50 Inner/Outer London split.
