Rents in London have dropped by between 10 and 15 per cent as fewer people are willing or able to move to the capital in the light of the Coronavirus crisis and its fallout.
The warning comes from London-focussed agency Chestertons, which says that as a result increasing numbers of landlords are left holding empty, or soon-to-empty, properties.
Before March, the agency had been seeing gradual price increases as strong demand from tenants and a limited supply of new rental properties coming onto the market pushed prices up.
However, this trend has seen a sharp reversal since lockdown started in mid-March and prices are now around as much as 15 per cent lower.
The lower levels of demand are due to several reasons:
- The student market – including the lucrative overseas student market – has dried up as students no longer know if they will be able to study in September;
- Corporate relocations are very low, as most companies continue to ask their staff to work from home and international relocations are put on hold;
- Existing tenants on furlough or worried about their future income are delaying committing to new leases as they consider cheaper accommodation options, including moving back with family;
- Other tenants are renegotiating lower rents with their landlords to avoid the hassle, costs and risks associated with moving.
Richard Davies, Chestertons’ head of lettings, comments: “We are now coming into the busiest time of year for rentals in London when rents usually are at their highest. 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.”
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My firm are anticipating rents to drop by 30% and transactions by 50%.
Fee income on new business down by 60% -70%.
Does that sound about right?
Nope it sounds completely wrong, people still have to live somewhere and the sales market is more vulnerable than lettings, so if anything demand for rental will increase while buyers figure out the sales market, which I think will recover strongly within a couple of months. The basics remain the same, high demand and short supply, you cannot buck the markets.
But for that model tenants need jobs.................improving prospects...............confidence.
Time will tell.
Mark Wilson you joker....
...try as you might to dress up your comments to try and make them look intelligent and fact based, many of us here immediately see through all that - especially if we've read a few of your many uninformed anti-landlord posts here.
(1) Of course there will be many firms going bust - because of yet more woeful government incompetence, this time in their dreadful mismanagement of virtually every aspect of the "virus crisis" which makes a nice change from them screwing up the PRS in the hope of making themselves more "popular"....
(2) There will also be many companies who realise that working from home for much of the time is perfectly possible and preferable for any of their office based staff... therefore there will be an accelerating number of them significantly "downsizing" their offices to just a core team, IT and a few meeting rooms...
These would have been more intelligent things for you to point out, except you didn't think of them as you're so focused on hating landlords and trying to be "influential" (which you're not - you're just another nobody/wannabee).
The effects of (1) & (2) will result - I predict - in tenants gradually moving to cheaper and more attractive places on the edges of towns (if they like towns as most do) or else into more rural locations (a romantic idea but the reality is most couldn't cope with it and so will eventually move back to suburbs).
That means rents MIGHT decline in high cost areas like central London while increasing a little in desirable suburbs with good transport links and decent schools and local shopping areas etc (except even more people will be mainly online shopping now so the impact of that will also be interesting to see).
Anyhow, Mark, as well as a "like" button there should also be a "dislike" button. That would make it more fun and help show what's really going on here !
We know you are some sort of left-wing "activist" surveyor with no apparent knowledge or experience of the PRS, but who hates landlords and makes all kinds of wild unsupportable claims, and so I "dislike" everything you've ever posted!
It's fun to see people taking you seriously and trying to talk sense to you when the more "seasoned" of us know you won't take a blind bit of interest in any well developed counter arguments to any of your garbage!
Mr X, I am not at all anti Landlord, not in any way. I just don't see the Landscape to be the same as you. What did I say? Rents will come down because wages will drop and unemployment will rise, is that so scandalous? And, of course other opinions should be taken seriously, especially when they are objective.
Mark - you responded to me by claiming you are "not at all anti Landlord, not in any way".
That's two "not"s in one sentence and a denial immediately followed by emphasis of that denial -
-- "The lady doth protest too much methinks"! --
"...not in ANY way" eh?
The trouble is I've read so many of your silly posts, all ether covertly or overtly anti-landlord so you can't fool me, but bringing out your dishonesty on top of your huge anti-landlord bias has amused me a little!
:-)
Barry, for the avoidance of doubt, I am not anti Landlord, I can just see what is happening in the real world. Renting has become highly political because of the status quo. Is that so controversial? The easy money has been made in buy to let, exit via the gift shop. You can ignore the reality, I don't mind. I have no idea why my posts are thought to be anything other than main stream.
Demand in rural communities where people can live a better life and work from homewill increase slowly
In principal, maybe yes to start with. But not necessarily long term.... Phil, please see my post above in response to "Mad Mark" as a few of us call him.
@Barry X
Mad Mark - I like it!
Glad I'm not a London LL.
There will be decline in demand in London.
Tenants and OO will be leaving London for greener pastures.
There are millions of office workers who now rarely need to use a city office.
WFH is going to cause major changes in the PRS.
Companies have finally realised that they don't need to drag in their workers to a centralised office every day.
Those companies that can will encourage their employees to WFH.
In fact Virgin Media INSISTS on it.
This will be a boon for workers especially mothers with child caring responsibilities.
They should be able to give up expensive nurseries etc and actually look after their own children while earning a full time wage WFH.
WFH will massively reduce the penalties that women have traditionally suffered from when children have arrived.
Indeed it also augers well for PRA interrogation requirements or the MMR if you will.
If able to WFH then no impact on a couple's ability to afford a mortgage.
Just watch the prices of semi-detached 3 bed houses increase in the sticks.
There will be a mass exodus of office workers from towns and cities as WFH becomes the preferred way of working for many companies.
To be able to have substantial numbers of office workers WFH will save companies millions in office costs.
Companies will be able to afford the same wage levels but still make far more profit once they have got rid of their expensive offices.
Companies have seen the light and they will NOT be returning to business as usual.
The opportunity to save on massive office costs is too tempting now that they can see that WFH hasn't impacted their capability that much.
Of course with the massive reduction in office workers attending expensive city offices there will a substantially reduced requirement for all the workers who service all the requirements of an office based company.
There won't be such a need for restaurant workers; cleaners etc.
So naturally no need for them to rent in London anymore.
All these circumstances will cause millions to remain
unemployed.
The services industries simply won't be required as much when considerable numbers of people are now working from home.
Indeed I am now seriously considering an office at the bottom of the garden rather than a big shed.
I predict commuting 30 seconds will become a desired requirement.
So I say London LL sell up your now dud properties and buy up 3 bed houses near a stn with decent sized gardens.
That is what tenants will want.
Plus they are future proofed if children ever come along.
Make sure the house is in a good school catchment area and you will have very long term tenants.
The times they are a changing!!.
Totally agree!
Don't understand how in April Chestertons : boast "Nearly 800 properties brought to market during lockdown" with the headline "Chestertons does thousands of virtual viewings and agrees hundreds of new tenancies' ( 23 April ) and now they are saying there is a reduced appetite from renters in the London Market after stating on 04 May 20 they were bringing out all of their staff from furlough"
They now say 'Existing tenants on furlough or worried about their future income are delaying committing to new leases as they consider cheaper accommodation options, including moving back with family"
That seems to imply that the hundreds who agreed tenancies in April didn't realise like the rest of us that the lockdown was going to last more than a month and are surprised they've not returned to work.
What do you believe...?
Chestertons are always on the money, given their extensive network of rentals across the capital, so if their indexes are predicting a 10% to 15% drops in rents then that is probably true. Add in the furlough factor and the third quarter of 2020 in the rental sector is going to be bumpy for landlords and tenants. Proptech-PR.com
They are only spot on if telling the truth, I'm not suggesting for a moment that they might overvalue by 15% to win new business and are now having to drop their figures to the real world open market value...
Chestertons also love getting their free bit of PR. Richard Davies is suggesting Landlords need to discount their current asking prices to avoid a void period. He has not however said they will need to accept a figure lower than the previous tenancy, which is the actual measure of rents decreasing. Sounds to me like he is on a purge for some price reductions to get some deals done, which is fair enough. Only 25% of the properties on their website are let. The more that landlords hear in the trade press that rents are coming down, the more likely they are to accept a lower offer. Nice bit of postioning and conditioning I would say.
i don't disagree that the effects of Furlough, poor job security will take its toll.
I struggle with that fact that this press release one month later gives such a less positive impression of the market last from last month.
It was clear to all in April , that furlough especially for those employed in lower paid employment was set to continue for some months hence, possibly ending in redundancy.
There WILL be a reduction in tenant demand in London.
'White flight' is ramping up as tenants and OO seek to leave London and it's diversity which many have simply had enough of.
They are now seeking properties in the hinterlands with no need to be a 45 minute tube journey to work.
They can live 40 miles further away for the same commuting costs.
The properties are half the price of London ones..For eg. a terrace house in Walthamstow is about £430000
Yet that same house is only £265000 in Southend.
The train journey from the Southend coast is 45 minutes to Central London.
The journey time from Walthamstow Cental to Cental London is about 30 minutes for about the same commuting costs as from Southend.
Why would anyone wish to own or rent in Walthamstow which is a very diverse area when for a considerably reduced rent or houseprices one can have all the same benefits as being in Walthamstow.
But in Southend which is a far better place to be than Walthamstow.
The beach is 15 minutes walk away.
LA are deluding themselves if the believe the London tenant will remain.
Many of them in rubbish hospitality jobs are returning to the family home.
There simply won't be the hospitality jobs in London and so no need for so many tenants.
Empty office blocks in London will create ghost towns.
For LA the growth will be out in the sticks.
London is a busted flush.
It is no longer needed when much of the London working population can work from home.
LL should be investing in 3 bed houses in the sticks.
That is where the demand will be.
As long as tenants can reach Central London easily it matters not the journey time as it will be only carried out max once a week.
Things have changed; time for LA and LL to realise it!
As someone who used to commute from Winchester in Hampshire to Central London for work, I can say there are plenty of people, if the standing room only trains coming via us from Bournemouth in the mornings are anything to go by, who are willing to commute well over an hour into London because they get much more from their money in the home counties and the surrounds.
If people work from home, why would anyone suffer the tube and the people commuting round the city if they can live more comfortably elsewhere.
With HS2 potentially bring journey times from Birmingham and Manchester below 2 hours, they could become commuter towns. Watch this space!
@James smith
Yep I believe your contentions are bang on.
I have been amazed at the numbers of searches that have been carried out on online portals for property in the West Country.
It appears that many London workers are seeking to move to what is traditionally considered as a holiday area.
Of course lots of Londoners have holiday homes in the West Country.
So for many Londoners they could just sell their London properties and move into their holiday homes.
This would cause property values to substantially increase in the West Country where already locals are priced out of buying property.
Introducing the sale proceeds of London property to the West Country will massively increase the prices of already scarce property in the West Country.
Also rents will massively increase if as it seems many London workers leave London for the undoubted delights of the West Country coastline.
I predict that all Southern coastal areas will be facing a massive influx of London workers.
As long as there is an OK train connection to London then being about 1.45 hrs travelling time from Central London pretty much enables most of the Southern Coastal areas to reach London in just under 2 hrs travelling time.
There will be no need to go through the daily commuter grind with so many able to WFH so living further away from London makes life so much cheaper and far pleasanter
There is no doubt about it that LL especially London LL need to seriously consider whether remaining in London is the wise thing to do.
It is clear many tenants feel no imperative to pay their rent.
LL will have to adopt far more DD on their tenants.
Personally if the tenant cannot qualify for RGI I will require tenants to have at least 6 months of savings to meet normal monthly domestic costs.
I will then know the savings account details so HCEO can obtain the savings if tenants refuse to pay rent.
It makes NO business sense if tenants refuse to have savings and then face sudden income losses
for a LL to take them on especially if RGI isn't possible.
It seems that tenants feel they have every right to not pay their contractual rent.
LL need to ensure they don't let to these type of feckless tenants.
Easy to say not so easy to achieve.
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