A shortage of rental stock is still pushing up rents in the UK’s prime markets, with rents in prime London seeing a 1.4% growth in the quarter, representing a 6.7% increase over the year, and a 15.9% surge since March 2020. This is according to the latest data from the Savills prime lettings index.
South West London, particularly Wandsworth, Clapham, and Battersea, experienced significantly higher growth, with quarterly increases of 6.6%, 5.1%, and 4.1%, respectively. Consequently, annual growth in these areas was at 6.8%, taking rents 21.5% higher than pre-pandemic levels.
However, the report also signals a slowdown in annual rental growth in Prime London. Jessica Tomlinson, a research analyst at Savills, said: “Early signs that price growth is starting to slow will come as welcome news to renters who have seen prices rocket since pandemic restrictions began to ease.”
Moreover, in the prime regional markets, rents rose by 2.5% in the quarter, leading to a 5.3% annual growth. Urban areas like Edinburgh, Birmingham, Reading, and Manchester saw the most robust growth, with an increase of 4.4% in the quarter and 8.6% over the year.
Tomlinson added: “Many tenants are now prioritising connectivity over space, reversing the trend that dominated the pandemic property market. In these locations, the smallest properties are seeing the highest rental growth.”
Despite forthcoming rental reforms, the financial viability of landlords’ lettings portfolio seems to be a more significant concern. Still, a lack of stock remains the biggest issue, according to a survey of Savills agents.
“Even in the less price sensitive prime market, rising rents will hit up against an affordability ceiling in the coming months and that will begin to constrain rental growth,” concluded Tomlinson.
