The rental sector bounce back in London and the Home Counties is now underway according to Knight Frank.
The agency forecasts rental values will end 2021 flat in prime central and prime outer London - and because there have been falls in the first half of the year, that means the firm expect rents to rise by five per cent in PCL and by three per cent in POL over the next six months.
Even so, by December this year average rental values will be 12 per cent below their pre-pandemic level in PCL and 10 per cent below in POL.
However, Knight Frank believes rents will have recovered to their pre-pandemic level by 2023, with average rental values rising by eight per cent in PCL next year and six per cent in POL.
By way of comparison, annual rental value growth exceeded 15 per cent as the property market recovered from the global financial crisis.
Meanwhile, rental values across the UK will continue to experience upwards pressure over the next five years due to the growth of renting as a tenure model.
Affordability constraints in the sales market and the greater flexibility that renting offers are two of the factors that will underpin demand and drive more Built To Rent.
“We have been surprised by how quickly activity has grown this year and is exceeding pre-pandemic levels in most areas of London” says Gary Hall, head of lettings at Knight Frank.
“Tenants are locking contracts in for longer periods as they plan for a return to normal life. The domestic market still dominates demand but numbers of international tenants, both students and corporates, are on the rise. After the financial crisis, it took three years for rents to recover and we are expecting the bounce back to be as quick if not faster this time.”
“Rents have dropped sharply since the start of the pandemic due to the combined effect of rising supply and falling demand” according to Tom Bill, head of UK residential research at Knight Frank.
“Demand and supply are now moving in the opposite direction, in some cases rapidly. This will lead to a marked recovery in rental values, a trend that will be boosted further by the re-opening of international travel.”