The London rental market has become a ‘nightmare’. Here because


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 masters, the 22-year-old graduate spent a month looking online for a room to rent in London on a budget of £900 ($1,070). He sent dozens of messages to free landlords and tenants and logged in for virtual viewings only to find that the room was already occupied.

“I think I sent over 100 messages to different ads and just did it [a] respond to 30 messages,” he told CNN Business.

Renters, real estate agents and property search specialists have described to CNN Business a frantic rush for rental units since the spring as students and workers returned en masse to the city after the pandemic.

That surge in demand collided with a steep decline in supply. Data from Rightmove, an online property portal, shows that the number of available rentals 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 all-time highs.

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

Blázquez said the apartment hunt this fall was a far cry from his experience in September 2020, when he last rented in the city. She settled into one place earlier this month but is paying nearly £300 ($357) more for a similarly sized room in a less desirable location.

“I rented it without seeing a video or anything because I was so desperate,” she said.

Matt Hutchinson, communications director at SpareRoom, told CNN Business the capital has seen a “huge influx” of students, youth and foreign workers in recent months, calling for the pandemic to be kept under control.

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

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

While demand has eased slightly since September, it is still above the average summer peak, when the market is usually most active.

“If someone has advertised a room in the last few months, chances are they’re getting hundreds of responses,” Hutchinson said. “It’s a battle just to get an answer or get an agent to see you,” she added.

Renters across the UK have to go to great lengths to secure a room.

In a SpareRoom survey of UK renters in September, one-fifth said they ended up paying several months’ rent upfront, while another fifth said they had to overbid their asking price to secure the room.

Nearly half said they had to decide during a viewing whether to get the room.

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

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

He finally got a room in a five bedroom house in south London for £950 ($1,130), though the landlord has warned the rent will likely rise. However, it’s relieved.

“Everyone’s super nervous looking for accommodations,” McLoughlin said. “You can’t falter in this market,” he added.

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

Jeremy Foglia, founder by Jeremy Leaf & Co, a real estate agency in north London, told CNN Business that the number of properties advertised on its site is down by as much as 40% since November last year.

Landlords have abandoned the rental market as it becomes less and less profitable.

Since 2016, the UK government has increased taxes on second home purchases and cut the amount of taxes landlords can claim on mortgage payments.

Many landlords are also concerned that it will soon become very difficult to evict difficult tenants, including those who they could be in arrears on rent, have caused damage or mistreated their roommates — if the government passes bills banning “no-fault” evictions, Leaf said. Landlords are able to evict tenants in a different process, but this often takes much longer and can involve a court hearing. Parliament is expected to vote on the new legislation later this year.

Add to that 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 skyrocketed,” SpareRoom’s Hutchinson said. “Increasingly, landlords are leaving the market because they can’t afford to,” she added.

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

Compounding the supply crunch this year, Leaf said, is that more renters are deciding to stay and renew their current rents for less of a rent increase than they’d get elsewhere.

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

Rental prices in London may have cooled a bit since their “fairly unprecedented” increases over the summer, Leaf said, but the city’s chronic undersupply means more hikes are on the way.

“Upward pressure on rents will increase,” he said.

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

Savills expects average rent in London, across all property types, to rise another 5.5% next year.

Those who pay less have to make big compromises.

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

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

Vince compares his research to his previous apartment hunt in 2019. So, about half of the people advertising rooms answered his questions, but this year he only received three responses for the 50 inquiries he sent.

“I have a permanent job now, I know how it works and I know a lot of people in London, but this time it was much, much more difficult,” she said.

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