This is being driven by accidental landlords who are renting out their homes while the sales market remains uncertain, as well as the remains of stock from the rush to exchange before the stamp duty surcharge introduced in April last year.

With tenants given more choice, landlords have had to be realistic in their pricing to maintain demand.

Small, but beautiful

A continuing trend has been the popularity of smaller properties over larger ones. During the last year, one- and two-bedroom properties across the commuter zone have maintained annual growth of 1.9%, while those with more than five bedrooms have seen rents fall by 3.1%. This is reflective both of accidental landlords fuelling stock of larger family houses as well as the relative scarcity of corporate tenants with large budgets looking for trophy homes.

Corporate demand

The prime commuter zone is popular with tenants who are relocating through work and looking for family homes near good schools and transport links. Economic factors usually play a part in determining the profile of these tenants, their budget and the size of properties they are looking to rent. Indeed, as the oil price begins to slowly recover, we are starting to see more demand from corporate relocators in the oil and gas industry, particularly in Surrey.

Leaving London

The prime London rental market has seen rents fall for an eighth consecutive quarter, and we are beginning to see the ripple effect of these falls moving out into the prime country rental market. The capital’s prime suburbs, such as Cobham, Northwood and Rickmansworth have seen falls of 2.5% over the last year. Prime outer commute locations, such as Cambridge and Winchester, have seen smaller falls of 1.8%. Despite these falls, the prime commuter zone presents good value. At £17psf in the commuter zone, compared to £37psf across prime London, there is an opportunity for families looking to make the move from London and renting on a ‘try-before-you-buy’ basis.

^{Source: Savills Research}

Outlook

Looking forward, we expect that the imbalance between supply and demand in the current market will hinder any substantial rental growth over the next two years. Yet demand will remain for those properties which are in the most popular locations and offer easy access to amenities, good schools and transport links to the capital.

The beauty parade still continues as stock of the highest condition is continuing to see the most demand and rental growth. For landlords to remain competitive in a high-supply market they must ensure they are flexible on terms, realistic on price and offer property in the best condition.

^{*NB: these forecasts apply to average rents in the second hand market. New build rents may not move at the same rate}

^{Source: Savills Research}