Renting in London forecast: Brexit uncertainty set to push average rents
Renting in London: the forecast says that there will be changes for both homeowners and tenants in the coming years.
The uncertainty around Brexit will increase the average rents than the prices of houses.
This will happen by 2023.
Other factors for these changes are unwilling buyers, an increase in the cost of build-to-rent homes, and huge deposits.
Places where forecast says an increase most in five years.
Over the next five years, the rises in the rents are predicted to be higher than the rises of the growth rate of house prices.
Although wages will be recovering by this time, there will still be uncertainty over financial confidence.
Savills notes that, by 2023, there will be an increase of 15.9% in the house rents in London.
Nevertheless, during this same period, the increase in the house price will only rise by 4.5%.
Private homeowners usually use affordability levels and wage growth to determine rents.
Following the global financial crisis, the prices of houses returned to normal as capital was made available.
Nonetheless, rents increased slowly with declining earnings. In about five years, there will be a change.
This is because rental growth will be higher than the price of the property.
There will be 11.5% increase in rents across the UK compared to a 15.9% increase in London.
The reason for the increase in rent popularity and how it affects higher rents
High prices of house
A basic structural change is going on in the housing market.
Lots of people now prefer renting to buying.
The doubt over Brexit and large deposits for purchasing a house are two of the major reasons.
Others include challenges of stamp duty costs and cautious lending.
These factors make individuals have problems with buying houses and will rather rent.
According to the forecast, the March deadline for the Brexit.
This is because many employers will temporarily spend more on their staff.
Thus, along with more demand for housing, the rents will go up.
Impact of Brexit uncertainty on tenants
Foremost, there is a volatile economic and political situation in the nation at the moment.
This situation is largely due to Brexit.
Therefore, it is understandable why many buyers and sellers will be hesitant to buy and sell properties.
As people wait for clarity on the uncertainty surrounding Brexit, the private rental industry is taking note.
The role of the private rental sector will increase significantly than before.
This is because it offers value and flexibility to both homeowners and tenants.
It has also been predicted that rents will increase further, especially in London.
The increase will be largely due to the low confidence of people in buying properties.
In addition, a lack of new construction will contribute.
Young people especially will be skeptical about buying home and acquiring a mortgage.
Changes in stamp duty
Another factor that will lead to an increase in rents is the recent changes in stamp duty.
The Conservatives took two actions that led to these changes.
Foremost, they initiated a 3% extra stamp duty on buy-to-let homes of small homeowners.
Also, they removed interest rate relief that was previously available for buy-to-let mortgages.
The landlords would like to recoup what they have spent on the stamp duty.
Hence, they will likely increase rents when finding tenants.
‘Try before you buy’ will continue in Central London
‘Try before buying’ is a new trend.
It is now a common phenomenon in the major central London real estate market.
Lots of sellers are looking forward to changes while the buyers are expecting the most valuable deal.
The phenomenon provides several advantages for tenants.
So, one of the important tips for tenants is to consider ‘try before you buy’ option if they want to buy a property.
Both the sellers and buyers are skeptical of commitment at the moment.
Therefore, ‘try before you buy’ has emerged in the luxury property industry.
This is common in Mayfair, Belgravia, Knightsbridge, Kensington, and Chelsea.
Buyers do not have much interest in outright purchase.
A few buyers now negotiate to pay a particular rent to try out a property.
Apart from the property, they also try out the neighborhood.
There will be an option to buy if they are comfortable with the deal.
After four years, ‘try before you buy’ has assisted the market in central London.
Brexit is bound to further increase this trend in the coming years.
Build-to-rent homes increase average rents in regeneration zones
Across London, new build-to-rent homes are also contributing to the increase in the average rent.
Young professionals, families and over 55s are the main targets of these homes.
Cinema rooms, roof terraces, communal elements, 24-hour management, and game rooms are parts of these homes.
Consequently, they are often more costly than the period homes that have been turned to flats.
Also, private landlords often rent them out themselves.
A study shows that districts with build-to-rent homes enjoyed the biggest increase in rentals in Greater London.
The study focused on the events of last year.
These districts are Southwark, Victoria, Hayes, Elephant and Castle, and Shepherds Bush.
Hayes is now the home of build-to-rent properties in the western outer areas of London.
HUB, a company that specializes in developing homes, just built the Material Store.
This new construction has 186 flats with 25 triplex homes on its Old Vinyl Factory site.
A one-room bedroom apartment goes for a monthly rent of £1,200.
The top-of-the-range Two Fifty-One complexes in Elephant and Castle is another one.
The complex boasts of a furnished three-bedroom unit.
The unit is available for a monthly rent of £4,765.
The apartment has a gym, lift access and a cinema room.
Another luxury apartment complex is Buckingham Green.
It is located between Victoria and St James’s Park. In this 16-floor tower, the monthly rent of a one-bedroom unit starts from £3,141.
You should start taking steps toward buying or selling the property now.
If you need any assistance in this regard, let Reneza help you.
Reneza will offer you top-notch real estate assistance.