The London rental market has become a "nightmare".  Here's why |  CNN Business

The London rental market has become a “nightmare”. Here’s why | CNN Business

CNN Business

For Rebeca Blázquez, the last few weeks have been a “nightmare”.

Based in Madrid but hoping to find work in London before starting her masters, the 22-year-old university graduate spent a month searching online for a room to rent. in London on a budget of £900 ($1,070). She sent dozens of messages to landlords and outgoing tenants, and logged on to virtual viewings to find that the room had already been taken.

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

Tenants, real estate agents and property search experts have described to CNN Business a frantic rush for rental housing since the spring as students and workers flocked to the town after the pandemic.

This increase in demand was met with a sharp drop in supply. Data from Rightmove, an online property portal, shows that the number of rentals available in London fell by almost a quarter between July and September compared to the same period in 2021. Prices have thus reached all-time highs .

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

Blázquez said finding an apartment this fall was a far cry from his experience in September 2020, when he last rented in the city. She moved in earlier this month, but is paying nearly £300 ($357) more for a similarly sized room in a less desirable location.

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

Matt Hutchinson, director of communications at SpareRoom, told CNN Business that the capital has seen a “massive influx” of students, young people and foreign workers in recent months – demands the pandemic holds.

At the height of September, there were almost nine people looking for every room listed on the site.

“We’ve never seen the market the way it is now,” Hutchinson said.

Although demand has fallen slightly since September, it is still above the average summer peak, when the market is usually most active.

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

Renters across the UK have to go to great lengths to book a room.

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

Almost half said they had to decide during a viewing if they should take the room.

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

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

He eventually got a room in a five-bedroom house in south London for £950 ($1,130), although the landlord has warned the rent is likely to rise. Still, he is relieved.

“Everyone is super nervous looking for housing,” McLoughlin said. “You can’t hesitate in this market,” he added.

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

Jeremy Leaf, Founder of Jeremy Leaf & Co, a North London estate agency, told CNN Business that the number of properties advertised on its site was down 40% from November last year.

Landlords are leaving the rental market as it becomes less and less profitable.

Since 2016, the British government has increased taxes on second home purchases and reduce the amount of tax property owners can claim on their mortgage payments.

Many landlords also fear that it will soon become very difficult to evict difficult tenants — including those who may be behind on their rent, have caused damage or abused their roommates — if the government passes bills banning “no-fault” evictions, Leaf said. Landlords can evict tenants using a different process, but it 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 to that rampant inflation and renting out property isn’t as lucrative as it used to be.

“Just the cost of getting people to renovate properties, the cost of materials has skyrocketed,” SpareRoom’s Hutchinson said. “More and more, owners are leaving the market because they simply cannot afford it,” he added.

Some owners have even decided to sell, taking advantage of rising house prices this year, Amelia Greene, director of real estate agency Savills, told CNN Business. The average asking price in the capital has risen 5% so far this year, according to Rightmove.

Worsening the supply crisis this year, Leaf said, is that more tenants are deciding to stay put and renew their current lease for a lower rent increase than they would get elsewhere.

A sharp rise in mortgage rates is also keeping aspiring first-time home buyers stuck in the rental market, further reducing available inventory.

London rent prices may have cooled a bit since their ‘pretty unprecedented’ rises over the summer, Leaf said, but the city’s chronic shortage of supply means further rises 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, according to data from Rightmove. This is 19% more than in February 2020, before the pandemic led to an exodus of workers from the capital.

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

Those who pay less have to make big compromises.

Sally Vince, who works in a commercial property, 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 had to compromise a lot on the number of people I live with… the amenities available, and just the overall condition of the apartment,” she said.

Vince compares her search to her previous apartment search in 2019. Then about half of the people who advertise rooms would respond to her inquiries, but, this year, she only received three responses for the 50 inquiries she has sent.

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

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