The Hamptons International Lettings Index in March showed that rental growth more than halved across Great Britain on both newly-let properties (i.e. homes that have been let to new tenants) and on renewed tenancies.
However as a result of the Covid-19 lockdown introduced at the end of March, more tenants are staying put.
This means Hamptons’ renewal index now provides a better representation of rental growth than rent changes on newly let properties.
Seven out of ten (70%) tenancies that were due to end in March were renewed, the highest level recorded in any March since 2008 when 77% of tenants renewed.
Rents on renewed tenancies in Great Britain fell -0.5% year-on-year in March, marking the biggest fall since the index began in February 2014.
This also represented a decrease from 1.5% in February 2020, driven by rent falls in the South.
The economic impact of the coronavirus has led to fears about jobs and earnings and in turn caused rents to fall.
Rents on renewed tenancies fell in the South East (-1.4%), and East (-0.4%), with London recording the biggest year-on-year fall (-2.2%).
London tenants’ incomes tend to be among the most stretched and are therefore more vulnerable to income shocks.
Meanwhile Scotland posted the strongest rental growth at 3.4%.
Average rents on renewed tenancies rose 2.0% in the Midlands and 1.6%% in the North.
Overall demand for rental accommodation decreased over the course of the month as lockdown measures were enforced.
The number of new applicants registering to rent a home in Great Britain fell by 31% in March 2020 compared with the previous month – a time of the year when applicant numbers tend to rise.
However there are signs that applicant demand is starting to increase again, after bottoming out at the end of March.
Meanwhile the stock of homes available to rent increased in March. There were 11% more homes available to rent in March 2020 than in February 2020, yet the supply of homes available to rent is still down year-on-year.
Wales and the Southern regions, including London, saw the biggest increase in the number of homes available to rent.
Some landlords who typically let their properties as short-lets decided to let their properties on a longer-term basis, and this has partly driven the increase in the number of homes available to rent.
An overall increase in supply combined with a reduction in demand suppressed rental growth on new lets in March.
The average rent on a newly let property in Great Britain rose to £980 pcm in March, up 1.2% year-on-year.
However rental growth decelerated from 3.3% in February 2020 having slowed in six out of the eight regions.
London (-1.3%) and Wales (-0.2%) posted year-on-year rent falls in March on newly let properties, but all other regions recorded rental increases (table 2).
Aneisha Beveridge, Head of Research at Hamptons International, said:
“The first signs of the Covid-19 effect on the rental market are starting to show.
“Tenants’ concerns about their future income prospects combined with greater risk of void periods for landlords willing to advertise their property on the open market, resulted in the rent falls.
“Once lockdown restrictions ease, we expect activity levels to rise.
“Renting offers more flexibility than buying a home, so as uncertainty rises, so too does the demand for rental homes.
“But although demand for rental accommodation is set to increase, and there are already signs of it picking back up again, the longer-term economic damage to people’s jobs and incomes means that rents on newly let properties are likely to fall between 2% and 5% this year.”
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