Life as a London renter has been a fairly miserable vantage point from which to watch the phenomenon of soaring house prices in the years since the financial crisis.
Yes, it’s enriching to try local living in several of the capital’s quirky and charming “villages”, but the price of the flexibility to swiftly switch from being a Notting Hillbilly to a hip Hoxtonite has been high.
Prime central London (PCL) rents leapt by 5.1 percent in the five years from the first quarter of 2011 to 2016, while real (inflation-adjusted) wages stagnated (at best). Meantime, the elusive dream of homeownership sailed further into the horizon with PCL home prices jumping by 37.3 percent over the period.
Yet the tide began to turn this time a year ago with the looming imposition of an additional 3 percent stamp duty(house purchase tax) on second homes as of April 2016, prompting buy-to-let investors to accelerate house purchases in the first quarter of that year and dump them onto the market, helping to boost rental stock levels.
Brexit-induced paralysis, owing to the uncertainty generated by last June’s referendum has contributed to the ongoing stand-off between buyers (who felt too unsure to cough up exorbitant asking prices) and sellers (who anticipated appetites would return and refused to drop prices).
As both sides waited, wannabe vendors added their houses to the growing rental stock levels, biding their time until they could sell.
Over this period, rising supply has met with shrinking demand as wary tenants continue to sit on their hands until more clarity emerges on Brexit – particularly in areas set to be hard shaken by the unwinding of the existing EU-U.K. relationship. PCL is front-and-center of the affected areas with a large contingent of financial services employees,as well as European nationals, dwelling within its exclusive boundaries.
The former could well be hit by an exodus of City institutions, many of which are far advanced in drawing up contingency plans to partially up sticks to the continent or to send thousands of their employees sprawling between rival cities such as Frankfurt and Paris which stand arms wide-open ready to embrace displaced bankers.
The Brexit effect on European nationals is already being shown, with data released by the Office of National Statistics (ONS) last month calling the most recent quarterly U.K.-wide immigration figures for EU citizens “statistically significantly lower” and the emigration figures “statistically significantly higher.”
Recent months have brought further good news for renters who deserve some feasting after years of famine. Despite the fickle government dropping several policy ideas over the past year, it has stuck with its move to ban agents from collecting letting fees from tenants and remains keen on making a concerted drive towards boosting private rented sector accommodation. This latter initiative should likely improve the quality and availability of rental offerings going forward.
Agents are warning that the letting fee ban will force landlords to charge tenants more for rent to make up for additional fees they will be paying but market realities show this stunt could be tricky for the landlords to pull off.
According to data last week from property information collators LonRes (provided exclusively for CNBC), new PCL rental instructions have jumped by 10 percent in the past year, further boosting the growing supply mountain. Meantime, over 50 percent of PCL rental properties have had to reduce their prices before they were let in the past year while the average rental price is down nearly 3 percent.
London renters, go out and get it while it’s not hot.
Op-Ed: Renters of London, rejoice … finally some better news