London rent affordability at 10-year high

Average monthly rents are at the same level as they were in December 2013, new data has revealed.

Zoopla said the fall in rents in London over the past year has resulted in rents being at their most affordable for ten years. Rental falls eased in Q1, with rents down -9.4% in the year to March, compared with -10% in the year to February

Average rents now account for 42% of an average single-earner income in London, down from 49% in March 2020, and a peak of 53% in Q4 2016.

Average rents in the City of London, Kensington and Chelsea, and Westminster, were running at their lowest for a decade, with the average monthly rent in Westminster at £2,259 per month($3,192.05), down from a high of £2,617 in February last year.

"Many of London’s renters are looking to future-proof current rental affordability, locking in cost savings for as long as possible, with agents reporting an increased number of longer-than-average tenancies (in excess of 12 months) being agreed," Zoopla said.

“In London, where rents are down 9.4% on the year, a modest reversal in rental declines has begun, but it will be a slow build back to pre-pandemic levels in inner London. The recovery will be uneven and we expect new or recently refurbished properties to attract higher levels of demand in H2 [the second half of 2021]," said Gráinne Gilmore, head of research at Zoopla.

However, the report pointed out that the rental market outside of London saw rents rise at 3% year-on-year, the highest level of growth in four and half years.

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But average affordability remains broadly unchanged as wages rebound from the dip recorded last summer, keeping pace with rental growth.

There has been a 59% uptick in demand for rental properties in the 28 days to the end of April, compared with the average demand recorded across the pre-pandemic market between 2017 to 19.

In the first quarter of the year, demand for rental property outside of London was 32% higher than the same period last year.

Zoopla also said the COVID-led decline in rental demand for city centre housing is bouncing back.

“Demand will continue to rise in city centres as offices start to re-open and this, coupled with increased affordability levels in many cases, will start to counter the negative pressure on rents seen over the last 12 months," said Gilmore.

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Renter demand is up 26% in central Edinburgh, 12% in central Leeds, 7% in inner London and 5% in central Manchester in the month since Easter.

Stock moving over from short-term lets into the rental market, and more rental stock coming back to the market amid easing demand led to a softening in rents in these areas, which are down by 0.7% in Leeds, 1.1% in central Manchester, 3.2% in central Edinburgh and 9.9% in inner London.

However, the downturn is starting to reverse as the economy opens up, workers start to return to their offices, leisure activities restart, and renters return in search of a rental bargain and restoration of their social life, the report said.

Increased demand for private outdoor space has characterised renter behaviour throughout lockdown and it still remains a priority.

The proportion of renters searching for rental properties with gardens has doubled since the pre-pandemic period last year.

"The good news for renters is that nearly half of properties available to rent currently have a garden or access to a shared garden, and the number of these properties available to rent has risen during Q1 to levels seen last summer," the report said.

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