There are signs of recovery in the prime lettings market in the Home Counties, the areas around London popular with commuters, with rents up 1.2% in the third quarter of 2017.
While they are still 2.6% lower than the same quarter in 2016, the index from real estate firm Knight Frank also shows that demand is rising with the number of tenancies agreed 24% higher year on year.
A sharp rise in prospective new tenant registrations and property viewings in the third quarter has come as higher costs associated with the sales market has encouraged a number of would-be buyers, especially those moving from further afield, to rent before buying, according to Knight Frank.
The index report says that an increase in corporate enquiries from individuals relocating to the Home Counties for work so far this year has also contributed to rising tenant demand, with an 11% rise in enquiries from relocation agents so far in 2017, compared with the same period in 2016.
However, while the headline figures points to a marked increase in activity, rental performance remains dependent on price, highlighting the current two tier nature of the lettings market, the report also points out.
Indeed, flats and smaller family houses in the sub £4,000 per month rental market accounted for 68% of activity over the course of the quarter, and tenancies were agreed faster than for properties with rents in higher price brackets.
Above this price threshold demand is more muted but the report says that in some cases landlords are willing to be flexible with regards to rents if tenants offer up-front rental payments or are able to commit to longer tenancies.
This is reflected in the index figures which reveal rental growth of 4.8% and 4.5% respectively for one and two bedroom flats in the third quarter while average rents for four and five bedroom houses fell by 1.7% and 2.5%.