Rents in Inner London lifted 3.9% in November compared to a year ago, sparked by the resumption of office life and global travel, according to Hamptons.
The estate agent says central London rents rose to an average of £2,329 per calendar month. However, the emergence of the omicron Covid-19 variant may halt this progress over the coming months.
The firm’s November Monthly Lettings Index points out that since the start of the pandemic last March rents in Inner London have been falling, bottoming out in April 2021 when they were down 22.1% annually.
However, last month, inner London’s rental market was boosted by a 14% annual rise in the number of applicants looking to rent.
Although, there were 71% fewer homes to rent than in November 2020. Last year the rental market was flooded with short-let properties that had been brought onto the long-term rental market at the start of the pandemic, says the index.
November also marked the first time in 20 months that the rate of inner London rental growth caught up with outer London, where rents have been rising for the last 15 months.
The report says a change in working patterns since the pandemic began has driven tenants to seek more space, boosting rents in the suburbs, while suppressing demand for inner-city living.
Despite positive annual growth, it still costs less to rent a home in inner London than it did on the eve of the pandemic. The average home in central London cost 11.6% or £305 per calendar month less than it did in January 2020.
The estate agent estimates that the pandemic has cost inner London landlords £2.9bn in lost rent over the last 22 months.
It adds that inner London is the only region where rents are lower today than they were in January 2020, although they are beginning to pick up pace.
The report expects inner London rents to recover to pre-pandemic times by the middle of next year.
A slow start to inner London’s recovery has meant that rents outside the capital have risen nearly three times faster than those in the capital since the pandemic began, the survey says.
Across the whole of the capital, rents have risen 5.9% since January 2020, but outside London rents have increased 16.1%.
The survey points out that nationally, the South West has seen the strongest rental growth since the pandemic began, with rents up 23.5%, or £195 per calendar month, since January 2020.
Having recorded eight consecutive months of double-digit growth, the South West continues to top the rental growth league with rents rising 14.6% over the last year.
In this region were 42% more applicants looking to rent and 21% fewer homes available in November than at the same time last year.
Hamptons head of research Aneisha Beveridge says: “Across Great Britain, rents have risen 7.9% over the last year, marking the strongest rental growth recorded in any November since our records began in 2013.
“A lack of stock and a continuation in tenants’ willingness to pay for more space has fuelled growth. In particular, this has benefitted Southern regions – outside of London – which have seen the biggest rent rises since the pandemic began.”
“While there are few signs to suggest that stock levels will rise next year, we expect the rapid pace of rental growth to slow as affordability barriers set in and household budgets come under further pressure. We expect rents across Great Britain to rise 2.5% in the fourth quarter of 2022.
“The pandemic has divided London into a city of two-halves. Rents in inner London have been hardest hit as the rise of flexible working has seen fewer new tenants move into the capital, while some tenants have moved to leafier neighbourhoods in search of more space.
“But the resumption of office life and opening of global travel marked a turning point for the rental market in November.
“While there’s still a way to go, rents in inner London are on track to reach pre-pandemic levels by the middle of 2022. This means, in a reversal of this year, we’re likely to see inner London rents outperform outer London in 2022.”