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Landlord sentiment improves in London as Covid restrictions ease

There’s been a bounce back in confidence amongst London landlords - although they remain more pessimistic than their peers elsewhere in the country.

Research by the OSB Group shows that tenant demand in London has tracked below the UK average since the first national lockdown was implemented in March 2020, with 10 per cent or fewer of landlords operating in Central London reporting increasing tenant demand for three consecutive months from the fourth quarter of 2020.

In comparison, UK regions have on average reported steadily increasing tenant demand since a low point during the first national lockdown. 

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This recovery has picked up pace in recent quarters and even Central London has recently observed a particularly sharp recovery in demand, jumping from just one in 10 landlords reporting increasing demand in the second quarter of 2021 to more than half of all respondents in the fourth quarter.

With this increasing demand, the proportion of UK landlords reporting positive prospects for rental yields has also trended upwards from a low point at the start of the pandemic. 

Despite this, Central and Outer London were the two worst-performing regions in four consecutive surveys from the third quarter of 2020.  

There was also a drop in confidence nationally in the fourth quarter, which was particularly pronounced in Central London, suggesting that this coincided with the introduction of the “Plan B” measures which once again mandated mask-wearing and working from home which may have resulted in a temporary drop in confidence.  

Despite this dip, London landlords’ prospects for rental yields at the end of the year remained higher than any other point since 2017.

Landlords operating in London have consistently ranked amongst the most pessimistic over a number of years, according to OSB – they have witnessed the most significant impact as a result of the pandemic, with three in four landlords operating in Central London saying their lettings business has been negatively impacted by Covid-19. 

They have also seen capital gains slow as a result of slower property price growth in the region, with ONS data for November 2021 showing that annual price growth in London was just 5.1 per cent compared to a national average of 10.0 per cent.

However, with lockdown restrictions now eased and becoming less likely to return, landlord confidence is starting to rebound across a number of confidence indicators as rental demand returns in the region.

 

Roger Morris of OSB Group says: “One of the biggest reasons the buy to let market in London was hit hardest during the pandemic is because a large amount of property was rented on a short-term let basis. 

“During the pandemic, the demand for short-term let properties fell sharply and flooded into the long-term rental market, further impacting this fragile rental sector. There was a clear trend also showing that many renters returned back to their family homes where they could see their families, save on rent and have increased access to outdoor space.

“But this more recent data shows that the economy is showing signs of positive change, with the buy to let market slowly returning as more properties go back on the short-term rental market in London as demand grows, reducing the volume of long term let properties available.  Renters that had relocated outside of London are now returning, possibly missing the city’s vitality but also in response to employers requesting staff to return back to the office.”

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