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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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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