Rents In London Have Bounced Back To Pre-Pandemic Levels
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Rents In London Have Bounced Back To Pre-Pandemic Levels

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

By Liz Lucking
Tue, Nov 2, 2021 11:25amGrey Clock 2 min

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.”

Reprinted by permission of Mansion Global. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: November 1, 2021.



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How much income is required to service a mortgage? It depends on where you live

New research suggests spending 40 percent of household income on loan repayments is the new normal

By Bronwyn Allen
Thu, Apr 25, 2024 3 min

Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.

Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.

“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.

CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.

Sydney

Sydney’s median house price is $1,414,229 and the median unit price is $839,344.

Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.

Melbourne

Melbourne’s median house price is $935,049 and the median apartment price is $612,906.

Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.

Brisbane

Brisbane’s median house price is $909,988 and the median unit price is $587,793.

Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.

Adelaide

Adelaide’s median house price is $785,971 and the median apartment price is $504,799.

Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.

Perth

Perth’s median house price is $735,276 and the median unit price is $495,360.

Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.

Hobart

Hobart’s median house price is $692,951 and the median apartment price is $522,258.

Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.

Darwin

Darwin’s median house price is $573,498 and the median unit price is $367,716.

Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.

Canberra

Canberra’s median house price is $964,136 and the median apartment price is $585,057.

Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.

 

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