Brexit: Rental Prices Starting to Slide

The average monthly rent in London has fallen for four months in a row. Rents across the UK have fallen by 0.3 percent over the past year, the first annual decline since 2009. According to the lettings insurance company HomeLet, Londoners paid an average of £1,500 a month for a new letting in May, 3% less than a year before.

The rental slowdown reflects the situation in the capital’s house sales market, where prices have also been declining since April.

Real estate agents say the slide in London rents may continue because of the political and economic uncertainty caused by Brexit negotiations and the Government’s loss of its parliamentary majority. All of which means that this could be an excellent time to sign a long-term rental deal or buy a home because prices are likely to rise in the years ahead. A report by the online estate agency EMoov predicts that property prices in London could rise by 80 per cent in the next decade. That would obviously send rents rising.

Cheaper Pound

There are many theories as to why rents have been sliding.

We might simply be facing the realities of Brexit, as the value of the pound has crashed and the demand from tenants is likely to keep falling. Net migration into London has already fallen over the past year and property analysts are closely following the growing number of announcements by banks and foreign firms that they are planning to move jobs to the continent. Other potential factors include a switch of demand from the capital to other cities and a decision by more homeowners to let rather than sell.

Brexit has obviously created new opportunities for foreign investors. According to the Beauchamp Estate’s 2017 Wealth Report, the fall in the pound has increased the interest of dollar-based buyers. Those buyers tend to be willing to spend £2m to £6m on a London property and the US dollar prices of such properties have dropped by well over 10% since Brexit. Meanwhile domestic investors have become more interested in other cities across the country such as Manchester. As a result the Brexit shock has flown through to influence the rental market.

Slumping at the top

Prices have fallen most sharply in expensive areas such as Kensington & Chelsea, Clerkenwell and Islington.

You can now rent a room for an average of £916 in the eastern-central area, where costs have fallen by 3%, compared to the previous year. At the same time, landlords in Stoke Newington now offer rooms for an average of £747 a month, also 3% less than in 2016. Shoreditch, Upper Edmonton, Manor Park, Chingford, Catford, Winchmore Hill, Totteridge and Whetstone are among the areas where rents have fallen for the first time in eight years.

While there has been a prolonged fall of prices in the middle of the market and in more expensive areas, some of the cheaper parts of London are seeing rents increase, especially in the south-east. According to SpareRoom.co.uk, a website for sharing flats and houses, prices for a room have increased in places such as Dulwich, Forest Hill and Herne Hill. The biggest annual rise of 16% was seen in Blackheath, where an average monthly room rent rose to £704 but the south-east remained the cheapest part of London. A room can be rented in Abbey Wood for an average of £506 a month, while landlords in Thamesmead are looking for £528.

 

by Karina Andrianova

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