London rental demand drops by up to 43 per cent, as students and Airbnb tourists stay away
While commuter belt interest has soared, London’s estate agents say that it is the halt in the international market that is as much to blame.
Demand for rented properties in London has dropped by as much as 43 per cent in the last year while demand in the commuted belt soared, a new study shows – but the capital’s estate agents say that this is as much to do with changes to the international market as it is with mass migration to the suburbs.
The report, collated by flatshare platform SpareRoom, also showed that no area of the capital has been spared a plummet in interest. London was also the only major town or city to suffer a decline in rental demand.
West Central London saw the biggest downturn, with year-on-year demand dropping 43 per cent, while East Central London also took a considerable hit, dropping 39 per cent. Even perennially popular hipster magnet East London saw interest drop by 19 per cent.
In contrast, demand in a number of the capital’s commuter belt towns increased during the coronavirus pandemic. Southend-on-Sea saw a 54 per cent increase in rental interest, followed by the likes of Luton (39 per cent), Milton Keynes (33 per cent), Slough (32 per cent) and Reading (27 per cent).
“We reckon about a third of tenants who have moved home in the last year have left the capital,” says David Fell, senior analyst at Hamptons.
Becky Fatemi, director of central London estate agent Rokstone, agrees that domestic migration of renters out of London is partly at fault, but highlights that it isn’t the only factor affecting demand.
“In 2020, when rental contracts were up, young tenants in London went home to stay with their parents during the lockdowns, or periods of furlough, or unemployment, due to Covid,” Fatemi says.
“This plus the disappearance of international students and the switch of AirBnbs to long term rentals means there is currently an oversupply of rental accommodation in the capital and therefore rents, in the centre of London particularly, have fallen.”
Duncan Blakelock, central London agent for Kinleigh Folkard and Hayward, has also seen supply outstrip demand in the centre, causing rental prices to drop up to 20 per cent in some areas. He also says that loss of the international market plays a considerable role in the shift.
“We have roughly double the registers that we had a year ago,” he says.
“Demand has changed. We have seen people working from home and therefore reassessing how close they need to be to the office. I don’t know if that will be a long term outcome of Covid, or if it’s a more transitional phase.”
“We’ve seen a huge influx of holiday lets as the AirBnb market – and all those avenues that would have previously catered for a more international clientele – have been forced to come back to a more traditional lettings market, so that’s really swollen the available stock register.”
The disruption of the international market is also the reason why London appears to be suffering more than any other city in the UK, as Fell points out.
“London is more interconnected with New York, Tokyo and Shanghai, where the markets are driven by international migration, and when that stops it gets pretty tricky for the rental market,” he says. “Whereas in places like Liverpool and Manchester, a lot more tenant moves are domestic.”
While demand declined dramatically in 2020, green shoots of recovery are already visible in 2021.
“We saw rents fall across the board during the first three months of the pandemic, but from May-June last year onwards, we’ve seen quite a pick up in outer London,” says Fell.
“The trend of urbanisation paused during Covid but it will return strongly,” predicts Fatemi.
“People in their 20s and 30s want to live in a city regardless of contagion. Downsizers too are choosing to untether themselves from the financial commitment of a house in the countryside – especially after a year of isolation. Since the vaccine programme began its roll out, enquiries to rent Thames-side apartments in London is up from this affluent generation.
“The Covid-19 pandemic has exacerbated the property cycle but it is still a cycle and this short term over supply will right itself and we’ll see rental growth over the next five years in London.”