A recent flurry of rental activity over the past few months has meant a return to pre-lockdown levels, but it's clear that there are regional differences in rental growth, with the North outperforming the South.
In June, rents fell in three out of the eleven regions in Great Britain, with London recording the deepest decline. However, outside the capital, rents rose 1.3%. The North recorded the strongest rental growth, with average rents rising 3.0% in the three combined Northern regions - six times the rate recorded in the same period last year. Rents also rose in the Midlands, up 2.9% year-on-year, followed by Wales at 2.6%.
London is the only region where the number of rental properties increased from the same period last year, and helps explain why London has seen the biggest fall in rents. This coincided with a decrease in the number of tenants looking to rent in the capital due to lockdown, with fewer international tenants and a trend for tenants wanting more space.
Yet it seems to be a different story in the North West which recorded the strongest rental growth last month. Here, tenant demand heavily outweighed the number of properties available to rent. There were 26% fewer homes available to rent than the same time last year, while the number of people looking to rent increased by 6%. As a result, there were 12.1 applicants looking for every property available, the highest ratio in the country, and up from 8.4 in June last year.
The positive demand seen in some parts of the country is supported by Rightmove, who have recorded a 40% increase in rental demand compared to last year. This is an early positive sign that rent increases in the North may continue with upward price pressures in these areas.
In addition to this, it also appears that landlord sentiment remains, with Rightmove reporting that a quarter of landlords are still planning to expand their portfolio.
Despite the various challenges in the rental sector, it’s clear that activity in the rental market has returned to pre-lockdown levels and there has been a notable increase in rental enquiries. The greatest determinant of what happens to rental values next will depend on what the continuing economic situation means for rental affordability in the current climate.