London’s rental market has become a ‘nightmare’. Here’s why


London
CNN Business

For Rebeca Blázquez, the last few weeks have been a “nightmare”.

Based in Madrid but hoping to find work in London before starting her master’s degree, the 22-year-old university graduate spent a month searching online for a room to rent. in London on a budget of £900 ($1,070). He sent dozens of messages to vacant landlords and tenants and logged on virtual viewings only to find the room was already taken.

“I think I’ve sent over 100 messages to different ads, and that’s all [a] responded to 30 messages,” he told CNN Business.

Tenants, estate agents and property search Experts described to CNN Business a frantic scramble for rental units since the spring, as students and workers returned to the city after the pandemic.

This increase in demand collided with a sharp drop in supply. Data from Rightmove, an online property portal, shows that the number of available rents in London fell by almost a quarter between July and September compared to the same period in 2021. As a result, prices have soared to record highs historical

The average monthly rent, including bills, for a room in a shared house or flat is £933 ($1,109) in October, up 17% from before the pandemic, according to data from SpareRoom, the nation’s largest roommate search site.

Blázquez said the apartment search this fall was a far cry from her experience in September 2020, when she last rented in the city. He moved into a place earlier this month but is paying almost £300 ($357) more for a similar-sized room in a less desirable location.

“I rented it without watching any videos or anything because I was so desperate,” she said.

Matt Hutchinson, director of communications at SpareRoom, told CNN Business that the capital has seen a “huge influx” of students, young people and overseas workers in recent months, demanding the pandemic stay bottled up.

At its peak in September, there were nearly nine people searching for every room listed on the site.

“We’ve never seen the market like it is now,” Hutchinson said.

Although demand has eased slightly since September, it remains higher than the summer average, when the market is usually at its busiest.

“If someone has advertised a room in the past few months, they’re likely to get hundreds of responses,” Hutchinson said. “It’s a battle to even get an answer or get an agent to see you,” he added.

Tenants across the UK should make every effort to secure a room.

In a SpareRoom survey of UK renters in September, a fifth said they ended up paying several months’ rent up front, while another fifth said they had to go above the asking price to secure the room.

Almost half said they had to decide during a viewing whether to occupy the room.

Greg McLoughlin told CNN Business that when he began his “exhausting” six-week search for a room in early October, he was often asked to pay a deposit equivalent to eight weeks’ rent, double the usual four weeks.

McLoughlin, who works for a cryptocurrency exchange, said he “rarely received messages” on SpareRoom, despite paying one £11 ($13) weekly subscription so I could respond to ads within seven days of their posting.

Eventually, he took a room in a five-bedroom house in south London for £950 ($1,130), although the landlord has warned the rent is likely to rise. Still, he’s relieved.

“Everyone is very close to finding accommodation,” McLoughlin said. “You can’t hesitate in this market,” he added.

The problem is simple. There are too many renters chasing too few available homes.

Jeremy Leaf, Founder of Jeremy Leaf & Co, an estate agency in north London, told CNN Business that the number of properties advertised on its site has dropped by up to 40% compared to November last year.

Landlords have been leaving the rental market as it is becoming less and less profitable.

Since 2016, the UK government has increased taxes on purchases of second homes and reduce the amount of tax that homeowners can claim on their mortgage payments.

Many landlords are also worried that it will soon be very difficult to evict difficult tenants, including those who may be behind on rent, have caused damage or mistreated their roommates, if the government passes draft laws banning “no-fault” evictions, Leaf said. Landlords can evict tenants through a different process, but this often takes much longer and can involve a court hearing. Parliament is expected to vote on the new legislation before the end of the year.

Add in spiraling inflation and renting property isn’t as lucrative as it once was.

“Just the cost of getting people to renovate properties, the cost of materials has gone through the roof,” SpareRoom’s Hutchinson said. “Increasingly, landlords are leaving the market because they simply can’t afford it,” he added.

Some owners have even decided to sell, taking advantage of rising property prices this year, Amelia Greene, director of real estate agency Savills, told CNN Business. The average asking price in the capital has risen by 5% so far this year, according to Rightmove.

Exacerbating the supply crunch this year, Leaf said, is that more tenants are choosing to stay and renew their current leases for a smaller rent increase than they would get elsewhere.

A sharp rise in mortgage rates is also keeping would-be first-time buyers trapped in the rental market, further reducing the amount of stock available.

London rent prices may have cooled somewhat since their “pretty unprecedented” increases over the summer, Leaf said, but the city’s chronic supply shortages mean further rises are on the way .

“The upward pressure on rents will increase,” he said.

Rightmove data shows the average monthly rent for a two-bedroom apartment was £2,226 ($2,646) last month. This is 19% more than in February 2020, before the pandemic caused an exodus of workers from the capital.

Savills expects the average rent in London, across all property types, to rise by a further 5.5% next year.

Those who pay less have to make big compromises.

Sally Vince, who works in commercial property, told CNN Business that after a “very stressful” time looking for her £700 ($832) room this summer, she took what she could get.

“[I] pay less rent, but I’ve had to compromise a lot on how many people I live with … the amenities available and just the overall condition of the apartment,” she said.

Vince compares his search to his previous apartment search in 2019. Back then, about half of the people advertising rooms would respond to his inquiries, but this year, he received only three responses out of 50 requests who sent

“I have a steady job now, I know how it works and I know a lot of people in London, but this time it was much, much harder,” he said.

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