Even London rents join the housing party

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The housing history of the past 18 months has been dominated by house prices and transactions. It has been a strange story.

Under economic conditions which, under normal circumstances, would have led to a fall in activity and housing prices, the opposite has happened, for the reasons explained above here.

Record interest rates, reduced stamp duties, a build-up of so-called involuntary savings, and people’s reassessment of what they expected from “home” added to a powerful set of factors driving the market. on the rise.

These forces have not disappeared as we go through the fall and beyond the reduction in stamp duties.

The latest Rightmove asking price survey showed a 1.8 percent increase for the month, October’s best result in six years.

The survey also showed what the real estate portal called a “full house”, the first since March 2007, with record prices requested in all regions of the country, and in all sectors of the real estate market, which it defines as first-time buyers, second-steppers and those at the top of the ladder.

“This ‘full house’ is an extremely rare event,” said Tim Bannister of Rightmove.

“The inventory shortages started after the first foreclosure, and they look set to continue, with underlying housing market fundamentals remaining strong and an added incentive to buy and fix your mortgage interest rate before prices rise. widely expected rate.

Mortgage interest rates are lower than ever before, and lenders are keen to lend in a competitive market, with equally robust job and wage growth. “

Now, too, the superlatives are not limited to the sales market.

It has been the fall of returning to the office, and for many people something like normalcy, although the government is keen to go further.

It’s also the fall of a revival in central London’s main rental market, according to LonRes.

In a new report, he highlights the fact that a dramatic drop in rental stock in the capital is forcing rents to rise sharply.

The number of prime London properties available for rent in September fell by two-thirds from the previous year, he estimates.

September 2020 was a strange period, but compared to the “normal” September 2019, the available rental stock has decreased by more than a third.

Rents achieved in the past 12 months are up 11.7%, he says, the biggest increase in 10 years.

The discounts offered on leases are also declining.

In March, the average discounts were 10%.

In September, they were 2.4%.

It was a roller coaster ride for London landlords, but rents reached in September were 0.4% higher than in February 2020.

“Those looking to renew a lease or look for a new property to rent may be shocked” said Marcus Dixon, head of research at LonRes. ”

“Renters are now entering a very different market than those who looked at it just six months ago.

Across London, stock levels have fallen almost 69% from the same point a year ago.

And that in turn has driven rents back to pre-pandemic levels as tenants vie for a place to live. “

Not everyone can aspire to the dizzying heights of central London’s main market, but many of these effects reverberate nationwide, according to the latest RICS (Royal Institution of Chartered Surveyors) residential market survey. .

He said a net 62 percent of respondents reported an increase in demand from tenants. This reading has been going strong for four months now, so there is no fire in the pot. It compares to a long-term average of 19%. As in the sales market, there is a shortage of supply.

RICS says owner instruction reading, at minus 21%, continues the negative trend seen since July 2020.

This supply-demand imbalance translates into higher rental growth.

In the RICS survey, the balance of short-term rental expectations reached a very high level of 55%.

To be clear, this is the difference between surveyors anticipating rising rents and those anticipating rising rents. A reading of 55 percent is high.

Looking across the country, the survey projects nationwide rent increases of just over 3 percent over the next 12 months. Across London, the expectation is 2%.

That’s a far cry from the larger increases in central London, but still represents a significant turnaround from just six months ago when rental expectations for the capital were negative.

The same economic forces apply to the rental and sales market.

When demand exceeds supply, rents increase, as do prices in the sales market.

And that is exactly what we are seeing now.



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