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Monday 14 March 2016
A fifth of London tenants pay over asking price to secure their home
The Countrywide monthly Lettings Index for February has identified a fall in tenants’ negotiating power when renting a new home. It has found that 12% of lets were agreed at more than the initial asking price over the last year, with the average tenant paying 99.9%, the highest level since 2007. This figure is highest in London where the average let was agreed at 100.9% of the asking price (table 2).
One in five of those renting in London pay more than asked for to secure a home of their choice, far more than those outside of the Capital. This works out at an extra £94 a month over and above the asking rent against a UK average of £44 which, over the course of a typical 17 month tenancy, this equates to an extra £1,578 in rent for the average Londoner. At the other end of the scale just 1 in 12 tenants in Wales end up paying more than the asking rent, by an average of £24 a month (table 2).
London has seen the largest growth in rents anywhere in the country since 2007, with rents 34% above their pre-recession record compared to 12% across the UK as a whole. Despite these increases, the proportion of lets agreed at more than the asking price has risen in every year since 2008 demonstrating the continuing balance of power towards landlords. In 2008 just 3.5% of deals were agreed at above the asking price while 23.5% of tenants were able to negotiate money off the asking rent. By 2016 the proportion of tenants able to renegotiate prices down has plummeted to 8%.
The average UK rent rose 3.2% in the year to February 2016, two thirds of the rate in February 2015. As was the case in 2015, rents are growing at the fastest rate across the South of the UK. The South East (5.8%), South West (4.8%) and Greater London (4.2%) all recorded rental growth at above the UK average while the Midlands (1.1%) and the North (3.8%) both saw rents grow more slowly (table 3). The slowdown in top end, central London rents continued with the price of a new let falling 8.4% year on year.
Commenting, Johnny Morris, Research Director at Countrywide, said:
“The combined effect of growing numbers of people renting and a lack of supply has seen tenants’ ability to negotiate diminish. Tenants are having to compete more often and with more people in order to rent the home they want, meaning they need to offer more money in order to push ahead of the crowd.”
The Countrywide Lettings Index has been running since 2012 and we continually seek to improve its accuracy. From June 2017 the methodology was changed to reduce the impact of seasonality and volatility in the rental market.
While the index remains a mix adjusted series, rent and rental growth figures for each month are now based on a three month rolling average rather than lets agreed in the last month. The most expensive decile of homes let has been excluded to reduce volatility and the mix has been updated to include the most recently published government stock statistics.
The Countrywide Lettings Index uses data from Great Britain's largest letting agent to track changes to the cost of renting. The index is based on the 90,000 homes let and managed by Countrywide in each year, adjusting for their location and type. It is based on achieved rather than advertised rents and the published monthly rental figures are an average of the new lets and renewals of tenancies over a rolling three month period.