For years, London has enjoyed the rapport as the hub for international talent and investments.
Students from all over the world migrate to London for higher studies and jobs. And this, in turn, attracts property investors.
Here are some facts to help you understand:
Over 100,000 international students from more than 200 countries come to London every year.
London's economy garners £2,500,000,000 from immigrant students alone.
London is also a popular tourist destination in all of the UK.
London alone creates over 200,000 jobs and £9 billion in the UK from tourism.
However, last year has been a turning point for London's real estate market.
The Impact Of Covid On London's Rental Market
With the onset of the pandemic, several companies imposed work from home. Schools and colleges shifted from in-class lessons to online classes.
As a result, many renters in London started heading back to the suburbs.
Yes, the change in location preferences is real and has immensely affected the real estate market in London.
The impact lasted for as long as March this year.
According to a report, "demand for rented properties in London dropped by as much as 43 per cent in the last year while demand in the commuted belt soared."
To more surprise, the trend was witnessed globally. Mass migrations from cities to suburbs for remote work and to escape the pandemic affected real estate markets all over the world.
Rental prices in London dropped as low as 13% with the onset of the pandemic. More so, some neighbourhoods even witnessed a drop as low as 22%.
Of course, this was an alarming situation for the investors. While, on average, a two-bedroom rental property was evaluated at around £2,600 per month before the pandemic, it now rested at £1,800 per month on average.
A grave concern for rental property investors, predominantly residential property investors.
However, recent reports suggest that the demand is returning to city centres.
London Rental Market Heats Up
Local realtors explain that London's rental market is now recovering despite the pandemic. During May, in comparison to April, a 17% increase in tenant registrations was confirmed.
Apart from this, 10% more homeowners now agreed to let their property.
Although there are still not enough properties available for rent, despite the increase in demand, market experts opine that the status quo will change soon.
In fact, as a result of this demand and supply contrast, fewer landlords are willing to reduce the rent. In comparison to last year, when landlords dropped as much as 20% of the rent, the market now seems to be coping up.
Some of the neighbourhoods that have witnessed a soaring increase in rent include Barnes, Wandsworth, Mayfair, Westminster, and South Kensington. The rent has seen an all-time hike with up to a 31% average increase.
This might result from offices resuming their operations like usual and schools and colleges reopening for in-class sessions.
With that in mind, and rents still at their lowest in years, tenants are rushing to the city centres. And London, being the economic and cultural hub, is witnessing the most demand.
Besides the easing situation with lockdowns and travel restrictions, international students are also expected to return soon.
So, can this be the revival for London's rental property market?
New Opportunities For Rental Property Investors
Mortgage rates in London's premium neighbourhoods are being revised. It means fresh opportunities are surfacing for buy to let mortgage in London for new investors. But, the real question is how stable would this new normal be in the coming months?
Consider this, London is already witnessing a sharp contrast in supply and demand. While the market is high, there are not many properties available for rent.
And, as mentioned already, the property owners are not willing to reduce the rent.
As a result, London's rental property market is behaving like a magnet for new investors. Promising returns and revised mortgage rates are critical players in this upsurge.
Besides, with the easing restrictions for immigrants and travelers, the tourism industry is also expected to revive in the coming months.
Now, that's also one of the prime reasons for investing in holiday homes or Airbnb properties.
Real estate market experts explain that vaccination drives across the globe, and better sanitization practices support the new normal. The rental property market in London may soon witness an upsurge in demand as more and more companies would resume their in-offices operations.
Financial experts, on the other hand, have an entirely different perspective. According to financial experts, every crisis is followed by new opportunities. And this is also true for the rental property investments market.
Probably, in the coming months, we might witness surging profits for rental property owners.
Alternate Market Trends
Indeed, it is not only the rental property market that has suffered the brunt of the pandemic. The real estate industry as a whole has witnessed a steep descend over the last year.
The mortgage rates increased, rentals declined, and investments reduced significantly.
Out of all the commercial real estate investments were the worst hit by the pandemic.
Since most companies opted for remote operations, the rentals ceased for office spaces. Likewise, many business complexes underwent heavy debts due to corked up rental income.
However, as the pandemic is receding and restrictions are expected to be lifted further, the commercial real estate might soon join the league's London rental properties.
And hopefully, this time, the growths and returns will be more promising for the investors if the market experts are believed.
On this note, it is plausible to assume that the real estate industry as a whole will survive this pandemic. After all, it is said to be the hedge against market fluctuations. And that is how it has acted over the last year.
In other words, despite the market ripples, the real estate industry has hardly witnessed any decline in property valuation.
So, let's wait and watch for what's more to come our way in the coming months.