The London luxury housing market is suffering from a lone blockade.
Homes in the most expensive parts of the capital are sitting empty for more than two months before the tenants are found, which is the longest waiting period since the last financial crisis, according to the property data company LonRes. And this despite the fact that rents have recently fallen sharply at the fastest annual rate in the last ten years.
The exodus of office workers and the lack of global visitors have hammered posh hotspots such as Maifair and Knightsbridge, forcing landlords to reduce their rents or see properties remain uninhabited. The number of luxury pillows for rent in central London increased by 75% compared to the year before.
It could be a long winter for homeowners with millions of pounds. Restrictions that continued or tightened in the last national blockade that began this month are likely to keep the rental ceiling for some time to come.
“It will probably take a few more months of accepting lower rents than you may have had in the past,” said Marcus Deacon, head of research at LonRes. “It’s just about the need for landlords to move this out.”
As the government races to vaccinate the population against the virus and move the country back to something that looks like normalcy, Mr. Deacon hopes a recovery is in sight. The following four tables illustrate the challenge facing the capital’s top market.
As tenancy expired last year and a pandemic repelled new residents, a flood of empty homes appeared on the market. Landlords are also working to fill short-term rental properties popular with tourists, as well as those aimed at international students, workers and visitors. It looks like it won’t improve any time soon, as the government will close all passenger corridors this week.
London’s luxury rents recorded the biggest annual declines since the financial crisis, falling more than 14 percent in the capital in December compared to the year before. It is not only the city center that suffers; the steepest falls can be seen on the periphery, because rich tenants decide to live further from the suburbs, said Mr. Deacon.
It is the right time to negotiate. Tenants who want to live in the most modern homes in London are canceling the almost triple discount they arrested before the pandemic, and more than half of the renters managed to reduce the price. “The apartment owners obviously want to try to limit the gaps as much as they can,” said Mr. Deacon. “But the reality of the current situation is that there weren’t that many tenants nearby, and those tenants could be more picky.”
Sellers do not fare much better than landlords. Before the coronavirus hit London, the sales market briefly enjoyed two-quarters growth before prices fell, continuing the overall decline that had been playing for years. As for the prospects for recovery, the jury has not yet been announced; LonRes points to the resilience of the market just before the outbreak as one of the reasons for the bull. – Bloomberg