London rents on newly let homes, homes advertised on the open market to let, fell for the third consecutive month, down -0.8% year-on-year, the Hamptons International Monthly Lettings Index has found.
This is despite 21% fewer homes available to rent than last year. However rents on newly let homes in Great Britain excluding London, rose 2.0% year-on-year.
Aneisha Beveridge, analyst at Hamptons International, said: “Despite low stock levels, rents on newly let properties (i.e. homes advertised on the open market to let) fell in London for the third consecutive month. Moving is costly for both tenant and landlord.
“In a period of uncertainty, where tenants’ incomes and landlords’ yields are squeezed, more tenancies are being renewed.
“With affordability stretched and less choice available on the open-market, more tenants are choosing to stay put. And with landlord yields under pressure from high property prices and tax changes, fewer landlords want to run the risk of looking for a new tenant and suffering void periods.
“But rents outside London continue to rise. Wales and the Midlands have driven rental growth outside the capital to increase 2.0% year-on-year, the strongest growth in nine months.”
However, rents on those properties where tenants renewed their rental agreement are more robust. In London, rental growth on renewed tenancies increased 3.2% year-on-year as 3.7% more tenants stayed put than last year.
The capital remains the only region across the UK where rents are falling. But rents on new lets in Great Britain, excluding London, rose to 2.0% in August, the strongest growth in nine months.
Newly let rents are falling in London despite stock levels continuing to decrease. This is because, since April 2016 when the stamp duty surcharge on second homes was introduced, landlords have sold considerably more buy-to-let homes than they’ve purchased.
So far this year, there were 6% fewer homes available to rent in Great Britain than at the same period last year. But in London stock levels were down 21%.
Across Great Britain the average rent of a new let rose to £975 pcm in August 2018. The Midlands and Wales saw the strongest rental growth, with rents on new lets up 3.3% year-on-year and 4.4% respectively.
Over August, inner London rents picked up for the first time in six months (0.4%), while rents in outer London continued to fall (-1.1%).
However, rents on renewed tenancies (where tenants chose to stay put, rather than move) remain robust.
In August there were 2.5% more tenancies renewing across Great Britain than last year, which means that rental growth on renewed tenancies has risen 2.8%, the highest level in 10 months.
This is particularly true in London. Renewal rents in London have risen for the last three months, reaching 3.2% year-on-year in August, despite rents on new lets in the capital falling. In fact, London has seen the second strongest renewals rental growth across the country.
With less stock available on the open market to choose from, particularly in the capital, more tenants are choosing to renew their current tenancies than move on. In London, the number of tenancy renewals has risen 3.7% so far this year compared with the same period in 2017.