The rapid recovery in London rents post-Covid has seen London tenants leave the capital in record numbers. Last year 40% of renters moving home in London chose to leave the capital, up from just 28% a decade ago. This equated to 90,370 households, with the numbers doubling since 2012. In total just over 718,000 tenants have left over the last decade. 62% of these were longer-term tenants, having moved into their home at least four years ago.
While homeowners outnumber renters in the capital by nearly 2:1, tenants tend to move home more often and are much more likely to leave. The 90,370 tenants leaving London last year compares to 62,210 homeowners moving out. This marks a return to form and a reversal of 2021 when more homeowners than renters left during a single year for the only time during the last decade.
The typical tenant doesn’t tend to move far. Each of the top 10 local authorities that most tenants move to directly border London. While the commuter belt is often prohibitively expensive for would-be first-time buyers, low yields mean renting remains relatively affordable compared to buying.
Tandridge topped the list with more than 52% of tenants in the area moving from London. However, tenants leaving the capital still tend to move further than homeowners, with 38% heading to the Midlands or the North of England, up from just 27% in 2019 and above the 13% of homeowners moving to the same regions.
The pandemic and the subsequent rise of flexible working has meant far fewer London tenants leave the capital for work. Just 22% of leavers in 2022 left for work related reasons, down from 32% five years ago. Leavers increasingly keep their job in the capital while working remotely or commuting back occasionally. Instead, tenants are leaving to make their rent go further and renting larger homes in nicer neighbourhoods.
Leavers disproportionately come from the least affluent corners of the capital. Over two-thirds of renters leaving London (68%) came from the 50% most deprived areas, a figure which has steadily climbed over the last decade. Despite trading up to live in a more affluent area, they were still able to move to a home which was 28% cheaper than where they were previously living.
We expect the number of renters leaving the capital to continue rising for the foreseeable future. London leavers are generally in their mid to late 30’s, seeking more space for a family or simply for a quieter life. But as younger generations are less likely to own their own home, leavers are increasingly likely to be renters rather than homeowners.
RENTAL GROWTH
While house price growth continues to slow, rents show few signs of deviating from their upward trajectory, with average rents up 8.3% on the same time last year. This rate of growth places January 2023 as the sixth strongest month for annual rental growth since the Hamptons lettings index began in January 2014.
Rents rose strongly right across the country, however the Midlands and North of England both recorded double-digit increases (11.2% and 11.0% respectively), with growth previously running in high single digits. Meanwhile the pace of growth in London eased slightly to 9.1% as Inner London rents completed their catchup to pre-Covid levels, slowing the headline rate of growth across the capital as a whole.
For the seventh month running, rents achieved by one-bed homes grew faster than larger homes as the hangover from Covid continues to unwind. Both one and two-bed homes recorded faster annual growth in January 2023 than in any month since the lettings index began (January 2014).
Back in November 2021, the average four-bed rent peaked at 126% more than the average one-bed. But this gap has since closed on the back of the average rent for a one-bed rent rising 11.3% over the last 12 months compared to 2.7% for four-beds. This leaves the average four-bed home costing 108% more than the average one-bed as of January 2023, still slightly above the long-term average of around 100%.
The number of homes coming onto the market remains well below pre-Covid levels, with landlords facing tough decisions as to whether the arithmetic still works if and when mortgage rates expire. However, the downward drift in interest rates will bring some relief for those who need to re-mortgage in 2023.
