The cost of renting a home in the U.K. capital fell the most in eight years in May as a glut of rental properties came onto the market and affordability issues led Londoners to seek cheaper accommodation.
The average monthly rent paid in May for new lettings in Greater London was £1,502, a 3 percent decline from a year earlier, HomeLet, the U.K.’s largest reference-checking and rentals insurance company, said in a statement on Tuesday. Rents across the U.K. fell 0.3 percent from a year earlier, the first annual decline since December 2009, the data shows.
The number of properties available to lease in London jumped last year as investors rushed to make purchases before an additional levy on rentals was introduced in April 2016. A difficult sales market has also prompted more owners to offer their properties for rent.
Billionaire property developer Christian Candy is selling a London development site earmarked for high-end homes as the capital’s prime property market falters. The brothers have diversified their interests in recent years: Christian has expanded his lending operation through CPC’s Fortwell Group division, a short-term lender to the property industry, while Nick Candy runs a UK-based interior design group, Candy & Candy, and also invests in start-ups.
“The world of prime residential is not what it was in [the Candys’] heyday, the days of One Hyde Park,” said a property consultant who asked not to be named.
Guernsey-based CPC Group has instructed agents at Knight Frank and Savills to market the Duke’s Lodge site, in Holland Park, after securing planning permission to demolish a 1930s mansion block in favour of new luxury homes. CPC is seeking more than £75m, having previously looked at developing the site itself.
Looking at the skyscraper rental market, At Canada Water, developer British Land Co., which also owned half of the skyscraper, has seen the value of land slashed by almost 11 percent as investors lose their appetite for riskier assets.
“Prime London assets such as the Cheesegrater with long dated-income have traded at record prices whereas assets facing short-term expiries have suffered,” said Sue Munden, a real estate analyst with Bloomberg Intelligence. “Developments were marked down after Brexit as valuers expected investors to require a higher return given the economic uncertainty.”
London’s commercial property market is in flux with the value of office buildings in the main financial district rising even as rents fall. A wave of Asian buyers have been pouring into the U.K. capital on the back of the weaker pound following the Brexit vote, snapping up buildings with long leases that offer better returns than government bonds. That pushed yields for the best offices in the City of London down to 4 percent in the first quarter, according to broker Savills Plc, despite doubts about London’s economic prospects causing the value of older buildings to decline.
London faces possible job losses to European rivals as business seek to maintain access to the EU. Coupled with the lack of clarity on Brexit and with a minimum two year exit, this has increased the risk in drop in revenue through building rentals.
“The market has paused for breath,” Rob Noel, the chief executive officer at Land Securities Group Plc said. “No one really knows how the negotiations” around Brexit are going to unfold. The value of the London office portfolio of Land Securities, Britain’s largest real estate investment trust, fell 4.4 percent in the year through March.
DMZ agrees that the unknowns surrounding the election and the looming spectre of Brexit are materially affecting London’s property slowdown. However, foreign investment does remain strong and the prospect of having a property in London verses the political risks mean London continues to be a hot prospect in the short term. Long term profits will steer people in the right direction, even if short term gains may be more difficult to find in the current market.