With rents falling in some locations by up to 30%, there are now early signs that the worst may be over, says Tom Entwistle
Abandoned offices, few returning foreign students or corporate moves, the flight to the suburbs and the countryside, all have contributed to the dearth of renters in parts of the capital that once thrived with activity.
Tourist flight has meant that many of the more profitable short term (Airbnb) type lets on the market have had to migrate to an already depressed long-term rental market. More vacant property chasing fewer renters inevitably means a drop in rent values.
In some parts of the capital, according to The Daily Telegraph, rents have fallen by as much as 22pc, but agents are now seeing renter registrations up 44pc year-on-year
February saw the fastest drop in rental values for flats and homes in central London since the start of the pandemic last March, as hordes of working tenants moved out of the capital. But already, landlords and tenants are looking beyond the crisis and landlords and agents are anticipating a post-lockdown bounce.
The Economic Statistics Centre of Excellence (ESCoE) has estimated that around 700,000 people abandoned the capital during 2020 and early 2021, many of them returning to their families in their countries of origin, as the industries they we employed in were shut-down.
The result was a collapse in the demand from these workers, predominantly renters, who did not renew their rental contracts. The lack of a tourist trade, meanwhile, means that short-term lets have been moved to the longer-term rental market.
Amelia Greene, of Savills estate agents told The Daily Telegraph that in some of the most expensive locations in London landlords were accepting drops as a much as 30% due to a glut of vacant residential space: “We saw really dizzy heights of supply,” in locations such as St John’s Wood, Chelsea and Mayfair, she said.
Another London agent, Richard Davies, of Chestertons estate agents, had said: “The number of available properties to rent is 83pc higher than this time last year.” But supply and demand are patchy, with big variations across the capital. In some central and eastern districts rental values have fallen by over 20% whereas southwest London has seen falls in the region of 7%.
Some tenants are taking advantage of the situation by moving around for bargains, but this is not likely to last as agents such as Foxtons are reporting prospective tenant registrations up over 40% year-on-year. Currently tenants are moving simply to try and lock in a better deal. Foxton’s Ed Phillips has said that “Tenants are trying to lock in deals for as long as possible. They want three-year tenancies.”
Anticipating a revival most landlords are resisting the temptation to take on long-term low rent commitments. According to Mr Phillips the average length of a new tenancy signing is 12.2 months, which is down from 15 months before the pandemic, and in 2019, it was 18 months, he said.
Expectations are beginning to change. If the Government’s opening-up plans go as expected there the will be something of a bounce-back to work in central London offices. Many people have had enough of working entirely from home, and the home working / office working debate will perhaps see a conclusion – no doubt some sort of middle way will develop, a hybrid system of working.
Corporate relocators made-up nearly 40% of the prime central London lettings market before the pandemic, and now this is only 10%, that’s according to Amelia Greene. So a return to offices will see a big jump in demand. London university intakes in the autumn could also see a rebound with foreign graduate students making up a large cohort of potential new renters.
The return of tourists may be a longer-term prospect but as they do return more of the longer-term rental market will return to the more lucrative short-term (Airbnb style) holiday lets.
Questions still remain as to the speed of a recovery and a return to the central London offices. Will there be more spikes in the virus, will lockdown be lifted successfully, will some people continue to work from home outside of the capital? All these are legitimate questions and uncertainties, but the signs are that there is a determination and a commitment to gradually return to normal.