Rents on three bedroom homes in London continue to grow while one and two bedroom properties get cheaper, according to new findings from Landbay’s National Rent Review.
The uplift in rent between one and two-bed properties across the UK (excluding London) is 19%, and only 15% when rising from a two-bed to a three-bed. However the divide is more severe in London where rents jump by twice the national average (32%) from £1,455 for a one-bed to £1,926 for a two-bed, and a staggering three times the national average (40%) to £2,690 for a three-bed.
The buy-to-let mortgage lender says the huge jumps suggest London has a far greater available supply of one-bed, and particularly two-bed, properties, than for larger homes. Tenants that have more two-bed properties to choose from will be willing to pay less in rent, which goes some way to explain why properties of this size have seen the greatest decline in rents. They fell -0.69% over the year, some £160 in annual rental payments for an average property, and -0.90% since their peak of £1,943 in March this year. It’s been a similar story for one-bed flats in the capital, which fell -0.32% in 2016.
Conversely, three-bed properties are the only property size in London where rents have ended the year without notable falls, remaining flat year on year by the end of 2016, at an average rent of £2,690.
Landbay said for tenants the question of living in a two or three-bedroom property has become more significant, especially given people are now renting three years longer than in 1995, so are more likely to have growing families before they have secured their first home.
John Goodall, CEO of Landbay said: “As house prices rise further out of reach of aspiring homeowners, Generation Rent is growing both in volume and household size, with people more likely to be in rental accommodation as they begin and grow their families. In London, where space is already at a premium, a relatively well-served two-bed rental market means those looking for more space now pay dearly for that extra bedroom.
“The government’s recent £7bn commitment to build 200,000 starter homes is step in the right direction, and it’s good to hear this will include a wide range of tenures across the private rental sector, but we mustn’t overlook the growing demand for larger rental properties, both in the capital and across the country. For landlords, the opportunity cost of offering a three-bed property in a London market crowded with smaller properties is clear; a 40% uplift in rent received for a house that is likely to have no more than 30% more living space.”