‘We ditched Croydon for cut-price Kensington’: falling rents attract young tenants to central London
Plummeting central London rents in the wake of the pandemic have pushed landlords in the priciest neighbourhoods to offer 50pc discounts, bringing in a wave of young tenants to the likes of Mayfair and Marylebone.
Rents in central London, defined as being within Zone 1 of London’s Tube network, were down 20.5pc in the year to March, according to Foxtons estate agents. In turn, this has brought a 110pc jump in registrations from 25- to 34-year-olds, heralding a revival of living in the capital.
Margaret Ogunwusi, 27, and her sister, Hannah, live in Croydon. A few weeks ago, they started looking for a rental house in Bromley. Instead, they have just signed a lease on a two-bedroom flat in South Kensington.
The sisters have agreed to pay £560 per week – 34pc less than the £850 that the property, which is let by Foxtons, achieved before the pandemic.
“We were surprised to discover that the prices weren’t that much higher than Bromley. With the roadmap on track, we thought it would be a good time to move further in,” said Ms Ogunwusi.
The pandemic has hammered central London landlords with a perfect storm. Corporate relocations and international students disappeared at the same time that the evaporation of tourism brought a flood of short-term let supply onto the long-term market. Meanwhile, the shift to remote working and a new desire for space triggered a massive outward movement of tenants to London’s suburbs.
In Marylebone, David Ornsby, of Carter Jonas lettings agents, said the supply of homes at the start of the year was up nearly 150pc annually. The tenants moving from overseas who used to make up 70pc of the market are still scarce. Rents in the neighbourhood have dropped 30 to 40pc.
The result is a sea change in tenants. Now, 70pc of new renters have moved into the area from previously cheaper parts of London.
“The same tenants who were moving out of London this time last year because of lockdown are now having conversations about coming back to the office, and their budgets are carrying them much further into central London,” said Mr Ornsby.
Young professionals in their 20s are moving from areas such as Clapham, Fulham and Hammersmith, and they are negotiating hard. “The competition for these properties is at an all-time low,” said Mr Ornsby. “We are at the bottom of the market.”
Matthew Huybrechts, of Dexters letting agents, said in buildings of short-term lets and serviced apartments some tenants have managed to secure 50pc discounts. “We have a building in Mayfair of 16 serviced apartments, which each used to rent for about £1,000 per week to hedge fund and embassy workers,” said Mr Huybrechts.
“That building has been empty for nearly a year and the landlord has bitten the bullet. We have just rented four of the apartments for £500 to £650 per week, all bills included.”
Ben Rayner, of agent KFH’s London Bridge lettings office, said: “Young people have agents diving at their feet to get a deal.” Landlords have slashed their asking prices, “but people are still offering 30pc below asking, and in some cases are getting it”, he added. One is offering an eight-week rent-free period.
In normal circumstances, many of these landlords would simply sell up. But the cladding crisis means that they are unable to, while others have become accidental landlords because of it, said Mr Rayner. Many investors have their hands tied while they wait for external wall safety forms or remediation. “We have 20 or 30 landlords who would have sold up but can’t because of cladding,” said Mr Rayner. That is equivalent to 15pc of the properties Mr Rayner’s office lets in a year.
Ed Phillips, of Foxtons, said central London rents would likely remain low for 12 to 24 months, until international travel and overseas students returned. But as lockdown eases and shops and bars reopen, there are more reasons for renters to move centrally. Employers are also beginning to talk about the return to the office.
Alex Newman, of KFH’s Marylebone lettings office, said enquiries in recent weeks had tripled. Half are from tenants who were looking in Zones 2 to 5, and have realised they can afford to live more centrally. “There isn’t a premium for the location any more,” said Mr Newman. “We have people who are coming in from Surrey, where they had moved back in with their parents for the pandemic, and are now living on the edge of Mayfair for heavy discounts.”
Tenants are being called back to their offices, but they do not want their old commutes. “Normally you could let on the basis of a Tube station,” said Mr Newman. “Now tenants are desperately trying to avoid the Underground. They want Boris bike stations, or a walk.”
