Rents in major regional cities are growing significantly faster than both London and the UK average, according to data from buy to let lender Landbay.
It says UK rents rose by 0.03 per cent in November which, although the lowest monthly rise since the start of the study, feeds into growth of 0.97 per cent over the full year.
This is fractionally better than at the same point in 2017.
The average monthly UK rent currently sits at £1,212, a rise of £10 since the start of the year. When London is removed, rents sit at £769, up from £761 since the beginning of 2018.
Rents are rising in 27 of the 33 London boroughs, a very different picture from this time in 2017 when rents were falling in 26 of the capital’s boroughs.
While every region in the UK has seen rents rising, the speed of growth has not been consistent - with all areas other than London experiencing a slowdown.
The East Midlands (up 2.25 per cent), Yorkshire and Humberside (up 1.5 per cent) and the West Midlands (up 1.48 per cent) have all experienced the most substantial growth in the past year and are expected to climb further in 2019, says the lender.
Growth in the North East peaked to its highest point in two years in November 2017 but since then growth has depreciated to 0.05 per cent on an annual basis – it’s lowest growth rate since August 2013.
“It’s hard to escape the fact that we’ve seen a slowdown in the property market due to Brexit uncertainty and recent tax and regulatory changes for landlords” explains John Goodall, chief executive and co-founder of Landbay.
“In that context, these growth figures show just how resilient property continues to be as an asset class. As with all investments, it is prudent to have a diversified portfolio – backed up in the case of buy-to-let by London’s recent fall and revival alongside strong performances from cities including Leeds and Manchester.
“London’s green shoots paint a positive picture for landlords ahead of what will likely be testing economic times with Brexit and further interest rate rises expected.”
While London’s rental growth stands at 0.58 per cent year-on-year, it is now cities like Leeds (up 2.54 per cent), Birmingham (up 2.05 per cent) and Manchester (up 1.91 per cent) which are experiencing accelerated annual growth, claims Landbay.
It says this could be attributed to internal migration as millennials leave the capital at the highest rate in almost a decade. Since the start of 2012, London has seen a net loss of nearly half a million residents as people vote with their feet amid the growing living and housing costs.
“The truth is there is now a twin speed rental market as London’s rent growth is dwarfed by cities such as Leeds and Manchester. This is being fuelled by the capital’s millennial exodus as countless young professionals realise there is more to life than London. This same message carries weight with landlords, who are increasingly seeing the value of investing in these regional hubs” says Goodall.
“In many ways it could be argued that the ‘Northern Powerhouse’ is beginning to take effect amid stretched affordability and a harsher tax regime.”