UK Rental Market: London Rent Prices Hit Decade Low
When you think of property investment hotspots, most people think of London. But this is beginning to change, as more investors and tenants are looking to other areas in the UK. As a result, London rent prices have fallen to the lowest and most affordable level in over a decade.
The capital will always be one of the most popular investment locations in the UK due to its robust economy and vast employment opportunities. However, a year in lockdown has impacted London rent prices drastically. Average London rent prices have fallen by 9.4%, reaching some of the lowest levels since 2011.
Before lockdown, affordability in London reached a peak. Post-lockdown, more of us are working from home. Tenants are no longer restricted to accommodation they need to commute from. Instead, they are beginning to look for places to rent outside of the city at much lower prices. In comparison, rents outside of London are up by three per cent – the sharpest rise in four and a half years.
The Impact of Lockdown
The appeal of living in central London comes from its vast social and travel amenities. In lockdown, the capital became a ghost town. Businesses, offices, and hospitality venues were shut. This resulted in a dramatic fall in demand and rental stock over-saturating the market. Renters and buyers alike began to reassess their purchasing needs.
Those living in high-rise flats during lockdown felt the loss of not having a garden, balcony or even pet. Not being able to legally spend time outside meant those living in city centre flats struggled through a heatwave, many of whom lived alone. For cheaper prices, the option of living outside of London became much more appealing. Without the need to go into work or utilise the lucrative hospitality scene, London rent prices were appearing futile.
What Impact Will the Easing of Lockdown Restrictions Have?
As restrictions begin to ease, we expect that demand for rented accommodation will soar. As businesses begin to go back into the office, city centre living will become desirable again. Also, our beloved hospitality venues are re-opening their doors. As a result, city centres are instantly becoming livelier. On top of this, with travel restrictions hopefully set to ease, London will see an increase in tourism. Consequently, short-term lets will become popular once again.
City centre living has a variety of benefits, especially for young professionals and students, who make up a large proportion of the rental market. Expectantly, they will be drawn back to the hustle and bustle of the capital.
However, some experts believe that prices will not go back up to pre-lockdown level. The UK is suffering high levels of unemployment and financial instability. Renting is a much lower financial commitment than buying a home and also provides more flexibility. Thus, it’s likely that because of the country’s economic damage, prices will stay relatively low for a little while longer.
The Growth of the North
With London prices moving at a drastically different pace to the rest of the UK, we have seen the creation of the ‘two-speed’ market. London was once the prime location for property investment. But, since lockdown, the roles have been reversed. Across the north of England, especially the North East, rental growth has hit a 10-year high.
Since the north is thriving, property investors are shifting their focus away from London. Especially first-time investors, who can purchase a much larger property in the north for a smaller budget. Rents in London are still double the prices of the north. With the North East and Yorkshire and the Humber having some of the most affordable rental prices, demand is highest in those areas.
From a property investment perspective, there has never been a better time to take advantage of more affordable regions of the UK. With renters reassessing their living requirements, we predict they will leave behind pricey London properties for more affordable areas.
That said, when life begins to return to normal, London will likely become appealing again. However, rather than returning to the pre-pandemic era, we might see a rebalancing in rental demand. The country could become less reliant on London as renters are beginning to see the benefit of properties outside of the capital.
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