Are housing rents in cities bouncing back? 

ONE FEATURE of the global economy over the past 20 years was the flourishing of the few global cities most successful at attracting money, ideas and people. Property values in those places—such as London, New York and Sydney—soared. Rent for an average studio flat in downtown San Francisco, one of the priciest places on the planet, cost about $,2,500 a month at the end of 2019.

Over the past 21 months, however, those cities were the most affected by the covid-19 pandemic. Lockdowns did away with hustle and bustle. As tenants fled to the safety of less-dense places the price of renting property fell. By December 2020, rents in New York City had fallen by 6% from their pre-pandemic peak (and by 15% in Manhattan) according to Zillow, a listings firm. Similarly in London, rents fell by 8.5% in the year to December according to Zoopla, another listings firm. Prices in Berlin, Sydney and Toronto declined too.

Some commentators thought big cities might lose their allure permanently. The adoption of remote working, particularly among tech workers, caused cheaper, secondary cities to heat up. Rents in Phoenix, Arizona, rose by 23% in the year to October, compared with 11% across America as a whole. In some cities it has become easier to consider commuting, since people are happier to sit on a train for longer if it is only once or twice a week. Prices in Bristol, a 90-minute journey from London, have risen by 8.4% in the past year, compared with 4.6% across Britain. Cities on islands have become attractive too. Hobart, a city in Tasmania, in Australia, and Victoria, on Canada’s Vancouver Island, have both seen rents rise by double digits over the past year.

Yet after their decline last year, rents are rising again in the biggest cities, too. Demand has risen as graduates and international workers start relocating again, and some rental stock has been sold for owner-occupation. Rents in New York City and Sydney are up by 6% in the year to October. London rents have risen by just 1.6% over the past year, but Spareroom, a company that lists spare rooms to rent, finds that among 50 British cities, demand for rooms compared to those available, has risen most in the capital.

Although there has been a “levelling-up” effect caused by the pandemic, with smaller cities seeing prices rise faster than in the biggest cities, rents are now rising across the board. Faced with grumbling from voters, some policymakers are considering introducing rent caps or restrictions on investment from big financial firms. This is likely to make matters worse. And for those who, lured by the renewal of the city, are planning a move to smaller cities like Phoenix or Bristol, the good news is that prices in the fastest-rising cities are still one-quarter lower on average, than in the most expensive cities. ■

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