News: London no longer leading rental growth

Tue, 16 Feb 16

Buy-to-let investors eyeing up the UK property market would do best to look outside of the capital this year, as new figures reveal that rental growth is cooling in the capital.

London has always been a step ahead of the rest of the country, both in terms of rents and prices, as low supply and growing demand pushes up values. Indeed, rents in London are now 104 per cent higher than the rest of the UK.

Nonetheless, rental growth is slowing. Greater London’s annual growth rate was its lowest since March 2014, while the rest of the UK has seen an increase in annual growth rate over the last 4 months. The average UK rental value excluding London was £740pcm - 5.5 per cent higher than last year (£702pcm), according to Homelet.

The site’s index highlights the South East, East Midlands, South West and East Anglia as the strongest markets for rental hikes in the last seven months, with only the North West seeing rents continually reduce. Indeed, average rental values have increased in 11 out of 12 regions in the UK, compared to the same period last year.

The figures are backed up by SpareRoom’s latest research, which found that London rents rose 3.5 per cent between 2014 and 2015, down from 9.5 per cent between 2013 and 2014. Across the UK, room rents are rising significantly faster (5.5 per cent) than in London (3.48 per cent), comparing Q4 2015 with Q4 2014.

The most expensive rents outside London are all in the capital’s satellite towns, with Esher (£641), Twickenham (£637) and Kingston (£621) topping the list.

The most expensive major towns/cities to rent in outside of London are Reading (£548) and Oxford (£537) With nine people searching per room available.

In terms of growth, though, Swindon and Luton are the hotspots to consider, with rents up 13 per cent and 12 per cent, according to Spareroom, followed by Bristol (11 per cent) and Reading (10 per cent).

Matt Hutchinson, director of flat and house share site SpareRoom.co.uk, says: "We’ve reached the point where London room rents are so high some tenants can’t afford to live there. Renters are naturally drawn to the next best thing – the commuter belt – where accommodation savings hopefully outweigh the higher travel costs. But that extra demand in London satellite towns like Harlow, where nine people are searching for every room available, means prices are rising sharply year on year there too."

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