Rents on tenancy renewals have seen their sharpest drop in years as the economic impact of the coronavirus continues – but millions of tenants are still struggling to pay the bills.
The latest letting index from estate agents Hamptons International found that rents on renewals have fallen on average by 0.5 per cent year-on-year for the country as a whole, the biggest drop since the index began in 2014.
On top of this, a staggering seven in 10 renters who saw their tenancies end in March opted to renew and stay put rather than move as the lockdown remains in place.
This represents the largest proportion of tenants choosing to renew since the financial crash of 2008, according to Hamptons’ analysis.
The impact of the virus has led to fears about jobs which has fed through to the drop in rents
Meanwhile, rents for new homes, rather than renewed tenancies, rose on average across the country.
The average rent on a newly let property climbed to £980 per calendar month, up 1.2 per cent year-on-year. London and Wales posted year-on-year rent falls in March on newly let properties, but all other regions recorded rental increases.
Hamptons said the economic impact of the coronavirus has led to fears about jobs and earnings which has fed through to the drop in rents recorded in March. However, the picture varies around the country.
Rents on renewed tenancies fell in the South East by 1.4 per cent and East by 0.4 per cent, with London recording the biggest year-on-year fall of 2.2 per cent.
London tenants’ incomes tend to be among the most stretched as rents are so expensive in the capital and, as a result, are more vulnerable to income shocks.
According to insurer Simply Business, the average rent in the capital for new tenancies is £1,665. This means on average renters in London will see a drop in their monthly rental bill of £36.63.
Meanwhile Scotland posted annual rental growth at 3.4 per cent, while average rents on renewed tenancies rose 2 per cent in the Midlands and 1.6 per cent in the North.
Overall demand for rental accommodation decreased over the course of March as lockdown measures were enforced.
The number of new applicants registering to rent a home fell by 31 per cent compared with the previous month – a time of the year when applicant numbers tend to rise.
However Hamptons said there are signs that applicant demand is starting to increase again, after bottoming out at the end of March.
There was also a massive 11 per cent increase in homes available to rent in March compared to February. Hamptons said this is likely down to landlords who typically let their properties as short-lets deciding to let their properties on a longer-term basis in response to the pandemic.
Millions of tenants are struggling to pay rent
A staggering three quarters of all landlords have been contacted by tenants worried about their rent payments, according to a survey.
Around five million households in the UK live in private rented accommodation, many of whom have had to take time off work, been furloughed, or lost their jobs.
A survey of 537 landlords carried out by eviction firm Landlord Action found that since the lockdown took place in March some 74 per cent of landlords have been contacted by tenants saying they will struggle to pay their rent.
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.
‘London, where tenants’ incomes are more stretched, recorded the biggest fall in rents.
‘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 – theoretically.
Beveridge added: 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 per cent and 5 per cent this year.’