11
2%
4%
2%
-12%
-13%
-6%
22 33
-6%
-3%
-5%
-9%
-12%
-13% -14%
-11%
-16%
-11%
Housing market
closed 23 March
to 13 May
Over 2020, as a whole, the increase in supply outpaced demand. This
imbalance created a surplus of rental stock, causing average rents to fall.
Over the year as a whole, average rents fell by 6%, from £435 p/w to
£409 p/w, an annual reduction of £1348 in landlords' income.
Income prioritised
The greatest fall in rents occurred during
the first lockdown of 2020 when the housing
market closed and landlords accepted lower
offers rather than risk voids. The oversupply
of homes to rent, particularly in more
central areas, remained, and most private
landlords prioritise income over headline
rents on the understanding that the rent
can be reviewed within a year and that
when the market rebalances, income will
recover. At that time, many commentators
were likening the economic shock of
Covid to the Global Financial Crisis of
2008 and there was a great deal of fear
for the future. In practice, the Chancellor
acted quickly to protect businesses and
jobs and now there is a widely held belief
that we can expect a strong bounce-back
when hospitality and retail reopen.
While rents did recover to some extent
when the market reopened in summer
2020, properties began to stay on the
market longer when the usual influx of
students didn't materialise and with
renewed restrictions over the autumn.
This trend continued throughout the first
few months of 2021 and the impact on
rents is most evident when comparing
March 2020 on March 2021, where we
saw a drop across London of 11%. Average rents fell across all areas
during the pandemic but the
severity of the fall varied between
each London zone.
ZONE 1 experienced the largest annual
decline in rents in 2020 since the Global
Financial Crisis, at 11.4%, from £550 p/w
to £487. With a 22% fall in renters per
instruction, it was no surprise that Zone 1
suffered the most. Demand for 1 bed
WHAT NEXT
FOR RENTS?
Jan
£490
£480
£460
£470
£450
£410
£420
£430
£440
Feb Mar Apr May Jun
2020/2021
AVERAGE
WEEKLY RENT
£459 £405
£481 £406
£465 £436
LOCKDOWN
The biggest drop in annual rents was seen in
February 2021. This fall was exaggerated as
rents in February 2020 had increased by 4%,
following a decisive general election and the
UK commitment to withdrawal from the EU.
8.6% FALL IN RENTS
Foxtons
Foxtons
The imbalance between
supply and demand put
downward pressure on
rents, causing average
weekly rents in London
to fall by 8.6%.
46.3%
22.0%
New instructions
Renter
registrations
ANNUAL CHANGE IN RENTS
EVERY ZONE TELLS A STORY
March 2021 vs March 2020
H2 2020 vs H2 2019
ZONE 1 ZONE 2 ZONE 3
-20.5% -4.3%
--99..22%%
2020 vs 2019
H2 2020 vs H2 2019
Unless otherwise stated, data is shown for 2020 vs 2019, Foxtons London offices only.
4 London Lettings Report Q1 2021 | What next for rents?
£400
Housing market remains open
Eat Out to
Help Out
scheme started
Tier system
introduced
Map out of
lockdown
announced
Student
migration
interrupted
Schools
return
properties fell by 7% and 2 beds by 10%.
The imbalance between supply and demand
was accentuated by the profile of renters in
the Zone 1 market; large volumes of students,
corporate and short-term lets, as well as a
high proportion of international renters.
Gen Y moved in to plug some of the
shortfall, but only if rents were discounted.
ZONE 2 rents declined by a more modest
6.1%, moving from £460 p/w to £432. The
fall was stemmed by an increase in demand
of 4.2% for 1 bed properties and 1.9% for
2 bed properties. That increase in demand
helped to support average rents in Zone 2.
ZONE 3-6 experienced only a very
small decline in rents of 2.4%, from
£391 p/w to £382. Rents were held up
by renters taking their central London
budgets further out, searching for more
space to work from home and outside
space. This resulted in renters per
instruction increasing by 11.6% in
these parts of the city.
WHAT IS THE PROGNOSIS
FOR RECOVERY?
The London rental market recovery will be
closely linked to the return of international
migration, students, business travel and
the workforce. As long as London remains
a highly attractive global city in which
to live and work, we expect international
migration to return. In a survey of over
200,000 global workers, Boston Consulting
Group and Totaljobs found that London
remained the most attractive global city
to both live and work. Other surveys
show that professionals miss the office
environment, with 54% of office
workers wanting to return 1 or 2 days
per week, and 25% wanting to return
3 or 4 days per week (Stanton House).
Pre-pandemic there were concerns about
London's pre-eminent status as a global
financial centre when the UK left the EU.
Those fears have been overshadowed by
more immediate threats but financial
services sentiment continued to pick up
in the last quarter of 2020 and business
volumes returned to growth for the first
time in over two years (PwC/CBI Financial
Services Survey). Although this survey
pre-dated the third national lockdown,
it reflects the underlying resilience of
London's economy. The roadmap out of
lockdown suggests all social distancing
will be lifted from 21st June 2021 and
the UK economy is expected to return
to pre-pandemic levels by mid-2022.
Rental markets tend to react fast to
fluctuations in the supply-demand
balance because both landlords and
renters are making short-term decisions
which can be revised. For that reason,
rents can quickly move downwards in a
weak market and recover just as quickly
once the market recovers. We expect
the current imbalance to begin to correct
itself as soon as the economy reopens.
5%
-5%
-15%
0%
-10%
-20%
Jan Feb Mar
Jun Jul Aug Sep Oct Nov Dec
YEAR ON
YEAR WEEKLY
CHANGE IN
RENT
£445 £417 £408
£443 £406 £405
£443
£436 £403 £414
LOCKDOWN LOCKDOWN
Unless otherwise stated, data is shown for 2020 vs 2019, Foxtons London offices only. London Lettings Report Q1 2021 | What next for rents? 5