blog.1.image
Finance
9 Nov 2020

Why the Cost of Renting is Falling in London

mohammed
mohammed

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

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.

More supply

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.

Conclusion

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. 

Related Mortgage Articles

blog.6.image

Airbnb Under the Microscope

The tax crackdown on short-term lets

Read Story
blog.6.image

The Tenant Eviction Ban gets Extended

The tenant eviction ban gets extended again – what this means for landlords and tenants.

Read Story
blog.6.image

Why Overseas Buyers Are in a Rush to Buy

While most buyers are facing a race against time to complete their home purchase before the stamp duty holiday expires at the end of March, overseas buyers have another deadline to contend with.

Read Story

COVID-19 update:

We're open and ready to provide mortgage advice!

Icon