The rental market in London has become a ‘nightmare’. Here’s why | CNN affairs


CNN affairs

For Rebeca Blázquez, the past few weeks have been a ‘nightmare’.

She lives in Madrid, but hopes to find work in London before starting her master’s degree. The 22-year-old graduate spent a month searching online for a room to rent. in London on a £900 ($1,070) budget. She sent dozens of messages to landlords and departing tenants, and logged in for virtual viewings to find out the room was already occupied.

“I think I sent over 100 messages to different ads, and I only had that [a] reply to 30 messages,” she told CNN Business.

Tenants, real estate agents and property searches specialists described to CNN Business a frenzied scramble for rental housing since the spring when students and workers flocked back to the city after the pandemic.

This increase in demand collided with a sharp drop in supply. Data from Rightmove, an online property portal, shows that the number of rental properties available in London fell by almost a quarter between July and September compared to the same period in 2021, driving prices up to all-time highs.

The average monthly rent, including bills, for a room in a shared house or apartment was £933 ($1,109) in October 17% more than before the pandemic, according to data from SpareRoom, the nation’s largest roommate search site.

Blázquez said the apartment hunt this fall was a far cry from her September 2020 experience, when she last rented in the city. She settled into a place earlier this month, but will pay nearly £300 ($357) more for a similarly sized room in a less desirable location.

“I rented it without seeing a video or anything because I was so desperate,” she said.

Matt Hutchinson, communications director at SpareRoom, told CNN Business the capital has seen a “massive influx” of students, youth and foreign workers in recent months – demanding the pandemic continue to bottle up.

At its peak in September, nearly nine people were looking for every room on the site.

“We’ve never seen the market as it is today,” Hutchinson said.

Although demand has slowed somewhat since September, it is still higher than the average summer peak, when the market is usually at its busiest.

“If someone has advertised a room in the past few months, chances are they’ll get hundreds of responses,” Hutchinson said. “It’s a struggle to even get a response or get an agent to see you,” he added.

Renters all over the United Kingdom have to make an extraordinary effort to get a room.

In a SpareRoom survey of UK renters in September, a fifth said they ended up paying several months’ rent in advance, while another fifth said they had to bid above the asking price to secure the room.

Almost half indicate that they have to decide during a viewing whether they want to take the room.

Greg McLoughlin told CNN Business that when he began his “exhaustive” six-week search for a room in early October, he was often asked to pay a deposit equal to eight weeks’ rent — double the usual four weeks.

McLoughlin, who works for a cryptocurrency exchange said he “rarely got messages back” on SpareRoom despite paying a £11 ($13) weekly subscription so he could respond to ads within seven days of posting.

Eventually, he bought a room in a five-bedroom house in south London for £950 ($1,130), though the landlord has warned rents are likely to rise. Still, he is relieved.

“Everyone is super excited to find shelter,” McLoughlin said. “You can’t hesitate in this market,” he added.

The problem is simple. There are too many tenants chasing too few available homes.

Jeremy Leaf, Founder from Jeremy Leaf & Co, a North London estate agency, told CNN Business that the number of properties advertised on its site has fallen by as much as 40% compared to November last year.

Landlords are leaving the rental market because it is becoming less and less profitable.

Since 2016, the UK government has increased taxes on the purchase of second homes reduce the amount of tax landlords can claim back on their mortgage payments.

Many landlords are also afraid that it will soon be very difficult to evict them difficult tenants – including those who could be behind on their rent, have caused damage or mistreated their roommates — if the government passes bills banning no-fault evictions, Leaf said. Landlords can evict tenants in another way, but this often takes much longer and may involve a court hearing. Parliament is expected to vote on the new legislation before the end of the year.

Add in rising inflation, and renting out real estate isn’t as lucrative as it used to be.

“Just the cost of getting people to renovate properties, the cost of materials has skyrocketed,” said SpareRoom’s Hutchinson. “Increasingly, landlords are leaving the market because they just can’t afford it,” he added.

Some landlords have even decided to sell, taking advantage of an increase in property prices this year, Amelia Greene, an executive at real estate agent Savills, told CNN Business. According to Rightmove, the average asking price in the capital is up 5% so far this year.

Exacerbating the supply crisis this year, Leaf said, is that more tenants are deciding to stay and renew their current leases for a smaller rent increase than would be the case elsewhere.

A sharp rise in mortgage rates also traps would-be first-time buyers in the rental market, further reducing the amount of available inventory.

Rents in London may have fallen a bit since their “fairly unprecedented” increases over the summer, Leaf said, but the city’s chronic supply shortage means further increases are on the way.

“The upward pressure on rents will increase,” he said.

The average monthly rent for a two-bedroom apartment was £2,226 ($2,646) last month, data from Rightmove shows. That is 19% more than in February 2020, before the pandemic led to an exodus of workers from the capital.

Savills expects the average rental price in London – across all property types – to rise another 5.5% next year.

Those who pay less have to make major compromises.

Sally Vince, who works in commercial real estate, told CNN Business that after a “very stressful” time looking for her £700 ($832) room this summer, she took what she could get.

“[I] pay less rent, but I’ve had to sacrifice a lot on the number of people I live with… the amenities available, and just the overall condition of the condo,” she said.

Vince compares her search to her earlier search for an apartment in 2019, when about half of the people who advertised rooms would respond to her questions, but this year she only received three responses for the 50 requests she sent out.

“I have a steady job now, I know how it works and know a lot of people in London, but this time it was much, much harder,” she said.

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