Rents in London are increasing at a record level with growth being fuelled by renters returning from outside the capital, new research shows.

Over the last 12 months, rents in London have risen by 12.3%, the fastest rate since the Hamptons Lettings Index began in 2013. It is also the second successive month that rental growth in the capital has outpaced the GB average reversing 26 consecutive months of London rents lagging behind the rest of the country.

So far in 2022, almost a third – 30% – of all new tenancies in the capital have been secured by someone moving from outside of London. This marks a sharp rebound from 2020 when just 12% of London tenants came from outside the capital – a time when many renters left the city to move back in with parents or rent in a more affordable area.

It is also the highest figure in at least a decade and compares to a five-year pre-Covid average of 23%. Inner London has become home to the majority – 65% – of these movers this year, up from a more normal 50/50 Inner/Outer London split.

Table 1 – Places tenants are most likely to leave for London (2022)

Source: Hamptons

Tenants leaving the Home Counties have been firmly behind the bounce back. Some 55% of tenants who moved into the capital this year came from Berkshire, Buckinghamshire, Essex, Hertfordshire, Kent or Surrey. This compares to a pre-Covid average of 40%, according to Hamptons.

More than one in four tenants based in Wokingham, Hertsmere and Epping Forest moved into London this year.

The shift in tenants moving into London from the Home Counties is also reflected in the distance tenants have moved. The average tenant coming to the capital moved 36 miles this year, down from 45 miles in 2019 and 50 miles a decade ago. Fewer tenants making longer moves from large northern cities is partly behind the decline.

Despite the resurgence in tenants moving from outside the capital, fewer are moving primarily for work. Just 31% of moves into London so far this year were primarily because of work, compared to an average of 40% in 2019. Instead, tenants were increasingly likely to move to study or because they had sold their home or due to a change in family circumstances.

Nationally, the cost of a newly let home rose 9.8% over the last month to £1,125 per calendar month (pcm), marking the fastest level of growth since the index began in 2013. This record increase means that just over half of all rental growth recorded during the last five years (18.2%) across Great Britain has come within the last 12 months.

Regionally, rental growth continues to be led by the South West of England where rents rose 13.9% over the last 12 months.  This was closely followed by London at 12.3%. and then the three Northern regions at 9.4%. This is the first time since the onset of Covid that London has been in the top three regions for rental growth in the country and this is due to the bounce back in Inner London rents.

Strong rental growth continues to be underpinned by the lack of homes coming onto the market.  There are 30% fewer properties available to rent this April than last, while the fall from pre-Covid levels comes in at almost two-thirds (down 61%). The North West (down 76%), Yorkshire & Humber (down 67%) and London (down 64%) have recorded the largest falls in rental stock anywhere in the country, with few signs of more homes coming onto the market.

Average rents on newly let properties

Source: Hamptons

Aneisha Beveridge, head of research at Hamptons, said: “With Covid being pushed further to the back of people’s minds, life in the capital is slowly returning to its new normal.  Tenants are returning to the bright lights of the city and this is driving rental growth to record highs.

“The rise of remote working means that fewer tenants are moving to the capital specifically for work.  In fact, a growing number of tenants choosing to live in London are working fully remotely and could live nearly anywhere in the country. The footloose nature of many jobs today means that it will be culture and lifestyle rather than employment that becomes the capital’s biggest draw.

“The current pace of London rental growth is predominantly down to the capital playing catch up with the rest of the country. Today, the average rent in London stands 103% above the average outside the capital.

“While this gap is up from 96% a year ago, it remains below the 120 -130% pre-Covid premium which has been eroded by strong rental growth outside the capital in recent years.  But the current pace of rental growth in London is likely to push the premium closer to its pre-Covid level inside two years.”