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Monday 12 December 2016
Gap between London rents and the rest of country narrows
In November the average London rent was 0.7% lower than last year (see table 2), the sharpest fall since October 2010 when the average rent stood at £901 a month. Over the course of the last 12 months, London has gone from the region with the second fastest rate of rental growth in Great Britain to the slowest.
The gap between rents in London and the rest of Great Britain has steadily grown over the last five years. By 2015, the gap had reached a record £490 a month, up from £150 a month in 2010 (see table 1). But with rents in the capital now growing at a slower rate than in the rest of Great Britain, the gap between London and the rest of the country has narrowed. By November 2016 the gap had fallen to £489 a month, the first fall since 2010 (see table 1). Rents in the capital currently stand 60% higher than in the rest of Great Britain.
The narrowing gap between London rents and those in the rest of the country has been driven by a surge in the number of homes available to rent in the capital. In November there were 32% more homes to rent in London than 12 months ago while the number of would-be tenants rose by just 9%. Over November the asking rent was cut on 11% of homes let in London, more than double the proportion in 2015 (5%).
Across the country the cost of a new let rose by 2.0% over the last 12 months, or 3.1% if London is excluded (see table 2). Rental growth has been driven by Northern England; the North East, North West and Yorkshire & Humber. Taking these three regions together, rents have risen faster than in any other part of Great Britain. A quarter (25%) of tenants renewing their contract in Northern England saw their rent increase in November 2016, up from 16% in the same month last year.
Commenting Johnny Morris, Research Director at Countrywide, said:
“Higher than usual numbers of homes available to rent has boosted tenants’ negotiating power. Stock growth has outstripped that of tenants. This is in part due to the hangover from the rush to beat the 3% stamp duty charge earlier in the year and a shift in stock from the sales market. With more choice and facing stretched affordability, many tenants are using their new found negotiating power to agree lower rents than in 2015.
“Since the gap between London rents and those in the rest of the country hit a high watermark in 2015, the gap has been gradually narrowing. The pressure on affordability and number of homes coming onto the rental market in the capital means that rents are likely to lag behind the rest of the country in 2017.”
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.