London rents show signs of falling post-Brexit
London is one of the world’s most popular destinations for workers, travellers and migrants. This status helps keep demand for property in the city – whether it’s to buy or to rent – strong and rents high.
But, since Brexit there has been a steep loss in both investor and consumer confidence which is making everyone more cautious about how they spend their money. In light of this, there is early anecdotal evidence to suggest that rent levels are falling.
It’s a further blow to private rental sector landlords who are still reeling from a number of tax changes from the Treasury; stamp duty land tax is higher for owners of two homes or more and their ability to remove mortgage interest payments from their income before they calculate their tax payment will also soon be gone.
“Private sector landlords, particularly in London have taken a number of hits recently,” said east London estate agency Peach Properties. “On top of the tax changes, they’re now having to deal with concerns over keeping their rental properties occupied and might have to lower rents in order to achieve that.”
A report in the Independent newspaper suggests that while official figures will take a while to catch up and show data for July, comments from estate agents have indicated that tenants who are willing to negotiate are securing lower rents than advertised.
A rental search on Zoopla is telling. If you search for most reduced in London flats there are a large number of properties where the rent has been significantly reduced during July.
And, this drop in rents could be exacerbated by a number of new residential London developments that are due to be completed around a similar time, one of the world’s oldest banks, Coutts, has warned in its post Brexit property assessment recent research note.
“When the supply of something increases, however desirable and popular, its price tends to fall and property isn’t immune to this process,” said Proskips.
While a drop in London rental prices isn’t great news for investors, it is likely to be welcome news to the many renters in the city and its various travel zones. However, rents will have to fall by a considerable amount before the majority of working renters will be able to live in a convenient and popular location while being able to save for a deposit to buy their own home at the same time.
Indeed, a recent survey from think tank Resolution Foundation has shown that millennials – people born between 1981 and 2000 – will have spent £44,000 more on rent by the time they hit their thirties than their baby-boomer parents (those born between 1946-65). At 63%, almost two-thirds of baby-boomers owned their own homes by the time they were 30, for millennials, that has fallen sharply to 42%, the research shows.
“Higher rents and a number of economic slowdowns, along with rising house prices have combined to make it much tougher for those in their 20s to live independently, enjoy life to the full and also save enough of a deposit to buy their own home,” said North London-based rent guarantee specialist Assetgrove.
No doubt there are lots of renters out their – and their parents – who are hoping that falling rents and house prices will combine to make the aspiration of home-ownership a reality, sooner rather than later.