Since the start of the first government lockdown in March 2020, landlords and tenants have been subject to a similar set of forces as buyers and sellers. But it was the rental market that experienced the slower year.
Last year around 23% fewer rental homes were marketed than in 2019, with London the only region where more homes were available to rent. By comparison, data from HMRC show that just 7% fewer homes were sold in 2020 than in 2019. A lack of rental stock has undoubtedly both suppressed activity and supported rents – although the picture is far from uniform across the country.
With tenants more likely to be impacted by job losses than homeowners, the recovery in rental stock in the months following the easing of the first lockdown in May was firmly driven by the top end of the lettings market. In the most affluent areas, where average rents are around £1,500 per month, just 17% fewer rental homes were marketed last year than in 2019. However, in the least affluent locations, where rents average about £750 per month, there were 25% fewer rental homes marketed.
The maximum fall in rents across Great Britain was a decline of 1.7% year-on-year in May. However, in places where stock levels have come under pressure, outside London in particular, rental growth has recovered rapidly. Rents increased nationally in October for the first time since the onset of the pandemic, rising 1.4% that month before accelerating to 3.0% in November and 4.1% in December. In January 2021, rents rose 4.3%, the fastest rate of rental growth since July 2016 and this increasing pace of rental growth has continued into this year.
All nine regions in England saw rents rise at the start of 2021, with rental growth also turning positive in Wales. However, rents in the capital have been slower to recover from lockdown than anywhere else – they only started rising again in November. In January rental growth accelerated to 1.0%, predominantly driven by outer London due to the desire for extra space and a shift towards the greenery offered by more suburban locations.
In inner London, rents remain 11% below where they were before the pandemic started. A combination of fewer tourists and students – both domestic and overseas – as well as less business relocation and immigration has suppressed demand for short-term lets, meaning that the owners of these short lets moved them to the long-term rental market. By late autumn this had led to a doubling of rental homes being marketed in parts of inner London, putting downward pressure on rents. Outer London was not subject to the same pressures, however, meaning stock levels remained lower and by January 2021 rents were back above where they were in February 2020.