For the first time since the beginning of the pandemic rents across all prime London regions saw a return to positive growth in the second quarter of the year, says Savills.
However, more robust rental growth continued across London’s commuter belt where demand from relocating families for three and four bedroom homes in regional towns and cities massively exceeded supply as ‘accidental tenants’ compete with try-before-you-buy renters.
The latest Savills market snapshot shows average prime London rental values up 1.0 per cent over the second quarter, as people continue to move back into London for work, study and leisure.
Two-thirds of Savills agents reported that corporate relocation demand had increased over the past three months, while a similar number reported falling stock levels as some landlords exited the sector and accidental landlords opted to sell into an improving sales market.
“As a result, new demand is now exceeding supply particularly in the family house market” says the agency.
Large properties with outside space continue to outperform, the search for space a clear legacy of repeated lockdowns. Rents for houses with five bedrooms or more rose 1.9 per cent in the second quarter to bring annual growth to 2.6 per cent, and for homes with a large garden rents were up 2.0 per cent and 3.6 per cent respectively.
“Since the start of the year we’ve seen people begin to return to London and stock levels have slowly been coming down from their very high levels at the start of lockdown” says Jessica Tomlinson, Savills research analyst.
“But this is the first clear signal that prime rental values have resumed their steady upwards trend from the 2016 low that was curtailed by the March 2020 market."
Meanwhile in the commuter zone, rental values ticked up by 2.5 per cent with urban areas seeing the strongest growth.
“Across the commuter belt, we’ve also begun to see a change in priorities with people seeking to be closer to transport links and lifestyle amenities in town and city centres, in contrast to the flight to country properties in village and rural locations seen throughout last year” says Tomlinson.
Suburban locations and those within London’s inner commuter zone such as Cobham, Tunbridge Wells, Sunningdale and Sevenoaks all experienced annual rises in excess of 11 per cent reflecting a desire among renters for good transport links as people begin their return to London workplaces.
Three and four bedroom houses in these inner commute family markets performed particularly strongly, experiencing growth of 10.7 and 10.1 per cent on an annual basis with supply unable to keep pace with demand.
Tomlinson comments: “Our agents across the commuter markets all reported competitive bidding taking place, with landlords often favouring those looking for longer term tenancies. This is causing issues for ‘accidental tenants’ – most notably young families moving out from London for schools and additional space – who’ve struggled to find the right home to buy or who had been planning a ‘try before you buy’ approach to a new area.”