Landbay CEO John Goodall says London landlords may be branching out of the capital with tightening yields having a negative impact.
His comments come after it was revealed residential rents in the East of England grew by 2.35% in the 12 months to July, the fastest rise of any UK region, and nearly four times the average UK growth rate of 0.64%.
The figures come from the latest Landbay Rental Index, powered by MIAC. The report also shows strong demand for low-rent accommodation by long-distance commuters is thought to be a contributing factor, pushing rents up by more than 2% in eight out of the ten counties in East England, and more than 3% in four of the ten.
Of the capital’s five hottest commuter belt hotspots outside the M25, four are found in the East of England. Luton (4.23%), Peterborough (3.75%), Thurrock (3.56%) and Bedfordshire (3.19%) all have average rents less than half of the London average of £1,873, but have all seen rents rise significantly in the past year, while in London they have fallen by -1.05%. The current pace of growth means a tenant in Luton is now paying £789 each month in rent, compared to £757 a year ago, an extra £384 over the year.
The findings highlight the growing affordability crisis facing young people working in the capital, suggesting that many are moving further afield to reduce their rent burden, possibly while they save for a house of their own.
Mr Goodall said: “With rising inflation and rock-bottom interest rates it is little surprise to see demand in the more affordable Home Counties rising faster than pricier parts of London and the South East. Naturally these surrounding areas are starting to experience a surge in rental prices, creating a ripple effect out from the capital.
"There are of course a number of factors at play, but as yields tighten in the capital landlords may well be branching out to the East of England in a bid to meet this demand.”
TFL recently revealed that Southern Rail trains are now the most overcrowded in the country, with some services carrying more than twice the passengers they were designed for, while figures this week suggested that more young people than ever, especially in London, are frustrated by the struggle to save, and now feel they will never find their way onto the property ladder.
Less affordable areas in London’s commuter belt, those with higher average rents and particularly those in the South East, have seen less demand and therefore slower rental growth. While the East of England has seen competition push up rents across the board, just 3 out of 19 counties in the South East have seen rental growth above 2%.