Average asking rents in London rose to an all-time high of £2,091 a month in the first quarter of the year as the number of available properties continued to drop sharply, according to new research.
Rightmove found that asking rents in the capital rose 2.9% in the last quarter alone, with further growth predicted this year.
After a few years of slowing and dropping rents in the capital, asking rents in London are now up 8.2% on Q1 last year.
Average rents increased as available rental stock in the capital dropped 33% in just two years, the figures from the property website show.
Housing supply in the PRS outside London is down 13% over the corresponding period.
Rightmove’s commercial director and housing market analyst, Miles Shipside, said: “There was a temporary slowing and drop in rents in London when the second home stamp duty tax came in back in 2016 as so many investors bought properties before this came in, leading to a huge increase in rental choice.
“But the lack of new stock since that time has led to rents increasing again, and London renters are now faced with rents that are over 8% higher than this time last year. Outside London, the pattern is not as extreme, but there is still a significant drop in fresh choice.”
Outside London, the North East is the only region to have seen a drop in rents over the past 12 months, down 0.3%.
Away from the capital, Scotland has witnessed the biggest rise in asking rents, which are up 6.7% year-on-year.
But it is the South East which has the highest average asking rents outside of London, with the average rental home being £1,054 per month.
Shipside continued: “Suffice to say the government’s introduction of higher stamp duty on second homes purchases back in 2016 combined with other tax increases has resulted in an ongoing trend of decreasing activity from investors in the buy-to-let market. Consequently, we’re seeing the initial price drops being replaced by rapid price growth in some areas.”
The ban on tenant fees comes into force in England on 1st June this year, with the Tenant Fees Act 2019 summarising the government's mandate on banning letting fees paid by tenants in the private rental sector and capping tenancy deposits.
Based on a five-week deposit cap, Rightmove has calculated that the cheapest deposits outside of London will be in the North East, at £630 per property on average. The most expensive will be in London at £2,415 per property. In London the cheapest deposit will be in Rainham (£1,216), with the most expensive in Kensington (£4,065).
Shipside added: “The upcoming tenant fee ban should spell some good news for tenants and it may lead to more people being able to move more often if they want to, thanks to the reduction in the cost of moving.
“It remains to be seen if the ban will be passed on in other ways such as increasing rents and tenants will still need to find a pretty hefty rental deposit in many areas.
“What we really need now is more fresh stock for the rental market so that rents don’t continue to rise at the current rate we’re seeing, so perhaps it’s a good time for some investors to consider buying up properties to let out as the tenant demand is definitely there.”