With students encouraged to stay at home and many workers in the city being furloughed or working fewer hours, demand for rental homes in the English capital has dropped off, which has in turn, weighed on rent levels. Amid the ongoing uncertainty wrought by the coronavirus pandemic, reports suggest the average London rent has declined by between 10-15% and that's despite an increase in demand as lockdown measures are eased.
This development follows a period of higher demand in much of March as a lack of available rental stock was still lower than the rate of demand. However, the situation has since reversed and landlords and letting agents in the city are in a position where rent levels are lower.
Numerous drivers for the drop in demand
According to research on the London market from Chestertons, there are four main reasons why demand for new rental properties in the capital has declined and pushed average rents lower too. They are:
- With some universities already stating that the 2020-21 academic year will be completed online and uncertainty elsewhere, the student market, including overseas students who make up a notable part of London student tenants, has dried up.
- Corporate relocations also make up a proportion of London lets. However, with working from home remaining a core practise for many companies for the foreseeable future, many international relocations have been put on hold.
- Where existing London tenants are coming to the end of their leases but are still on furlough or are have lost their jobs, rather than agreeing a new contract or moving to a new rental property, many are opting to move elsewhere including back home with family, until they can gain more certainty around their job and income.
- Another feature behind the decline in rents is where existing tenants opt to renew an existing tenancy agreement, but negotiate a lower rent as both parties avoid the additional issues that come on top of the usual end of a lease and bringing in a new tenant.
It’s also worth mentioning that there has likely been a rise in the number of available rental properties as many properties usually rented out in AirBnB style short-term lets have been made available for longer-term renters as the tourism market has stalled.
Lower rents reverse typical seasonal increase
This period of the year is usually when rents rise as demand for rental homes in the city rises due to a number of details, including students securing a property for their next academic year. However, the coronavirus continues to affect the housing and rental market, often in unexpected ways.
“We are now coming into the busiest time of year for rentals in London when rents usually are at their highest,” said Chestertons’ head of lettings, Richard Davies. “However, we have seen a rapid switch from a landlords market to a tenants market and landlords are now having to discount their properties by 10 to 15 per cent in order to secure a tenant, or risk facing a long void period with no rental income.”
With so much uncertainty, it seems many landlords are willing to agree a lower rent rather than have no tenant at all. This is good news for tenants agreeing those lower rents, but its likely landlords are hoping this situation reverses and they can maintain their current levels of monthly rent – at the very least.