We are starting to see rental demand in London pick up and our teams at our 16 London lettings branches are working hard, liaising between landlords and applicants to ensure new tenancies can be agreed. Of course, it is clearly a tenant’s market now. With a lot of stock coming onto the market recently, there are plentiful supplies of rental properties available across London and applicants know they are in a strong negotiating position.
This has created some downward pressure on rents which have softened by 10% – 20% in some areas. So the immediate priority for landlords is to be flexible and prepared to negotiate to ensure that their property is tenanted and bringing in a regular income, even if that is not as much as they were hoping for.
We do expect this difficult period to be relatively shortlived though and as we continue to ease out of lockdown we expect the London rental market to recover fairly quickly.
The positive news is that, while demand for rental properties fell by 55% back in March, 45% of rental enquiries held up. Zoopla reported dramatic increases in rental enquiries when the market reopened in May while Rightmove reported that May 27th was the busiest day ever on its website, with 6 million visits. So despite the challenges, as we saw in previous economic crises in 1998 and 2008, the London rental market bounces back and we are confident this will be the case now.
Some of the key issues for landlords are existing tenants who have either lost their jobs, are on the government furlough scheme or who have left London to wait out the lockdown at home. Understanding a tenant’s situation is key in order to find a solution.
We’re pleased to report though that most of our existing tenants remain employed and are not experiencing any problems.
And where there are issues, our managers and directors are working around the clock to help both landlords and tenants find solutions.
As I mentioned, asking rentals are softening and rental properties in the £300 – £500 price bracket are most in demand at the moment. Many applicants are looking to sign two or even three year tenancies because, once they have found a property they like, the rent is probably less than they would have had to pay a few months ago. Alternatively, they may find a higher quality property than they might otherwise have been able to afford. This, coupled with the fact that applicants don’t want the hassle of moving too often, means they are increasingly taking out as long a tenancy as possible.
When it comes to applicants’ requirements, more inside space, perhaps an extra bedroom, is important as more professionals are working from home, and some outside space is now essential for many.
We have started to receive a few enquiries from students looking to start their university courses in September/October although clearly we are not as busy as usual. International travel remains difficult and only when restrictions are eased further will we see how demand is likely to pan out over the next few months. Currently, it is still too early to predict how demand will be this year but we will keep you regularly updated with news.
Of course, demand for rental properties in London varies a lot at the moment and while some areas are quiet, demand is picking up in others. Here are a few of the key trends we are seeing at the moment.
In the City and East London, with few relocations taking place, rental demand is from professionals already living locally. We have had some enquiries from corporate tenants, mostly from professionals wishing to upgrade now that rents are lower than usual. Many of our tenants are now working from home and professionally haven’t been affected by the lockdown. In fact, less than 5% of our East London tenants have asked for rent payments to be deferred.
Rental demand is starting to improve and whereas a few weeks ago many enquiries were not serious, just applicants putting out feelers as to the state of the market, now they are much more committed and if they make an offer on a property, they usually finalise the tenancy and move in.
It’s too early to say how demand from international students will be this year but we are hoping that, if airbridges are opened up with other countries and quarantine rules relaxed, this will encourage more students to take up their university places in September and October.
In Highgate and Hampstead, conditions are tough. There is a lot of stock on the market, from lettings agents across the area, so tenants have greater choice than usual but demand is fairly slow. Those who are moving home are looking for two or three year tenancies to give them some stability – and a good deal.
In central London, our Knightsbridge, Hyde Park and Kensington branches are showing properties to applicants again, with both virtual and in person viewings, and staff working hard to get tenancies agreed. Several properties have been let over the last month, from one and two bed apartments to a large family house. Applicants are negotiating to get a good deal and landlords must be flexible, responding quickly to any queries to ensure an agreement can be reached to avoid applicants agreeing a tenancy elsewhere. A realistic attitude is key to secure a tenant and ensure a consistent rental income while we ride out the current crisis. Luckily, most of our landlords understand the need for this more flexible approach.
Our Nine Elms branch is receiving enquiries but there has been a noticeable change in the type of property in highest demand. Previously, two bed apartments were flying out, popular with professional sharers who wished to reduce their accommodation costs. Now one bed apartments are more popular as most applicants are less willing to share, even if it costs them more – this is now common across our branches.
So, despite a challenging market, rental demand in London is starting to bounce back, although the market is quite different to how it was in early March. Large amounts of housing stock, tenants keen to negotiate hard with landlords and some tenants in financial difficulties – these are just some of the issues that we and landlords must deal with now.
But we mustn’t lose sight of the key issues. People still need a roof over their head and in our experience, most of our tenants are not experiencing financial problems. As the lockdown continues to ease and London’s professionals are keen to return to some normality both in their personal and working lives, we expect rental demand to continue to spring back. We just have to be patient.
If you would like to discuss the right strategy to ensure your rental property lets as quickly as possible, contact your local branch manager who can discuss local market conditions with you.
View all posts by Anita Mehra