It’s a worrying time for London landlords and a good time for tenants in the capital, as a rise in available properties is pushing rents down.
Hamptons International research shows that room rents dropped by 34% in Aldgate (EC3), from £1,244 to £724.
They also fell by 20% in Maida Vale/Paddington (W9), and 17% in Westminster/Belgravia/Pimlico (SW1).
This isn’t limited to just a few areas however, as Central London rents have slumped by 14.1% annually to September.
It seems the Prime areas of London are more impacted than the outer suburbs.
Looking at HomeLet data, which includes the whole of London, rents in the city have dropped by -2.6% between September and October, as well as -3.7% year-on-year.
The pandemic has caused people to re-evaluate where they want to live.
There have been numerous reports of people prioritising green space compared to before the pandemic, especially when more people are working from home.
Being able to work in the garden is clearly a mental relief from being stuck in one room, or a small apartment.
In the capital there’s a premium on space, so few areas really fit this bill. This has resulted in people heading out of the capital in search of somewhere more comfortable.
Of course, the pandemic has also impacted people financially, likely causing some to relocate to cheaper areas because they have no choice.
In November Benham & Reeves research found that furloughed tenants in London would have to spend 82% of their income on rent. Clearly this isn’t sustainable, and people in this position must be thinking about moving elsewhere – even if it’s just to a cheaper area of the capital.
One factor affecting the London markets is a lack of international visitors, which is causing those running Airbnbs to search for long-term tenants instead.
This means there’s a greater supply of properties on the market.
Indeed, Hamptons International said there are 40% more rental properties available than this time last year.
As a result void periods are up, as 68% of landlords experienced a void period between July and September.
In this environment, it’s not surprising that landlords may be dropping their prices to entice renters.
While landlords are never happy to see rents fall, there is the question of whether rents were overly inflated before.
It’s unclear whether this trend of lower rents will be a long-term one, or if the market in London will totally rebound once the pandemic is over.
Whether this is the case depends on the proportion of the workforce that continue working from home in the years ahead.
Will businesses treat working from home more favourably now it’s become the norm this year? If so then it’s more practical for London workers to move somewhere greener.