Rents In London Have Bounced Back To Pre-Pandemic Levels

London rents have rebounded to pre-pandemic levels as the city gradually returns to business as usual and brings tenants with it, according to a report Monday from Benham and Reeves.

Current rental values in the capital are now 9.4% higher than they averaged during 2020, with the leafy fringes of the city recording the strongest performances, the lettings and estate agent said.

Rents are up 20.1% year on year in Kingston, 18.3% in Bexley and 15% in Newham. Only in the City of London, the capital’s historic financial district, have prices failed to recuperate, with rental values still down 11.4% annually.

But, “while a bounceback from pandemic decline is encouraging, the real positivity lies within the fact that the average London rent is now 5.7% higher than it was in 2019,” the report said.

“Demand for rental homes evaporated almost overnight during the pandemic causing a surplus of stock on the market while rental prices plummeted,” Marc von Grundherr, director of Benham and Reeves, said in the report. “But the London market is nothing but resilient and when the tide starts to turn, it turns very quickly indeed.”

Already in high demand—the number of homes the estate agency is seeing rent is up 67% year on year and up 22.7% versus pre-pandemic levels—rental properties are expected to be increasingly coveted as international tenants return.

As such, the outlook is sunny for the city’s rental market, and the agency expects rents to rise 5.5% next year.

“We can say with confidence that the London rental market decline is now firmly behind us,” Mr. von Grundherr said. “Any lower confidence forecasts of further price reductions can now be disregarded with yet further positive growth forecast for 2022.”

Climate change is already affecting home values due to the impact of more severe weather events and rising home insurance premiums, and the cost of building is likely to rise as regulatory changes designed to enhance climate resilience alter building codes and zoning laws, according to a new report.

The National Housing Supply and Affordability Council describes climate change as an emerging trend that is raising the cost and complexity of supplying more housing. In its newly released State of the Housing System report, the council discusses how climate change is reducing the value of some homes when major weather events cause flooding or other natural disasters.

“The price differential between flood-affected and non-flood affected homes has been estimated to be up to 35 percent a year after a flooding event,” the report says. “Furthermore, the RBA estimates around 7.5 percent of properties are in areas that could experience price falls of at least 5 percent due to climate change by 2050.”

More than one million households are struggling to afford home insurance, and rates of non-insurance are increasing due to the cost. For example, the Australian Competition and Consumer Commission estimated that 40 percent of homes in Northern Western Australia were uninsured in 2020.

“Climate change is causing home insurance premiums to rise across Australia, adding to already elevated housing costs. Homeowners in areas considered at–risk of natural disasters are expected to see insurance premiums rise further or have difficulty obtaining insurance due to heightened risks.”

More frequent and severe weather events such as cyclones and bushfires, as well as coastal erosion and flooding from rising sea levels, present risks to housing safety. More than 3,000 homes were lost in the 2019-20 bushfire season, causing $2.3 billion in insurance losses. The report says the predicted direct cost of natural disasters to the economy and housing will be $35.2 billion per year by 2050.

Climate change and net-zero targets could raise the cost of building new homes, the report says. “Regulatory changes to enhance climate resilience will alter building codes and zoning regulations.

Developers facing higher compliance costs may have difficulties meeting updated standards, potentially delaying or reducing housing availability.”

However, the report says the increased cost of building a home with climate-resistant materials and eco-friendly features is more than offset by lower energy costs over a property’s lifetime. The current minimum energy efficiency requirements within the National Construction Code are estimated to deliver a household–level benefit-to-cost ratio of 1.37, according to the report.

Rents In London Have Bounced Back To Pre-Pandemic Levels

With demand on the up, the forecast is sunny for 2022’s rental market.

The insurance premium gap between flood affected and non-flood affected homes is significant