Figures from investment consultancy London Central Portfolio show how vulnerable the capital’s rental market is to Brexit and Coronavirus - but also suggest a way forward once travel restrictions lift.
In LCP’s latest report it says that EU nationals made up 43 per cent of new tenancies in 2020. Italy and France led the way with over 46 per cent of these tenancies.
“Happy to capitalise on the lack of overseas demand, a large proportion of UK tenants - 35 per cent - moved to prime London attracted by widely advertised rent reductions, as landlords competed within a depleted pool of tenants” says the consultancy in its end-of-year market report.
“The impact of travel restrictions, on a market predominantly reliant on overseas students and young professionals, has been reduced demand, surplus of stock and longer void periods.
“Existing tenants have stayed in situ where the property is of a high standard and diligently managed. They have broadly been comfortable with paying passing rents during a time when new tenants have been able to negotiate significant discounts. This highlights the importance of tenant retention during periods of increased competition where prime London in 2020 was labelled as a renter's market.”
In detail, LCP says the time taken to let a vacant property increased in Q4 reaching a new peak of 76.8 days. Stock not let in the traditionally buoyant September, due to Covid-19, remained available in the winter months increasing vacancy periods in recent weeks.
Rents achieved in 2020 were 10.4 per cent below the six-year average. This was a result of reduced demand from overseas tenants unable to enter the UK and an increase in available stock coming across from the short-term let market, says LCP.
In line with previous years, the majority of new tenants in 2020 were under the age of 30, and 90 per cent of tenants were under the age of 40 compared with 82 per cent in 2019, illustrating a continuing trend of young adults heading to the capital.
The consultancy ends its report on an optimistic note, saying: “Looking to the future, landlords and buy to let investors should take reassurance that once the vaccine has rolled out and travel restrictions are lifted, London will again experience an influx of overseas tenants waiting in the wings to continue their metropolitan life that they have missed over the last year.”