What Can the Previous Rental Downturns Say About Market Prospects?

UK PROPERTY ADVISORS

The two most recent periods of falls in the prime London rental market resulted in rental falls of 20% and 15% respectively. This fall happened quickly and affected the entire market. Prime London rents have fallen by an average of 9.6%. However, this number varies across different parts of the market. The reasons for the current downturn are complex. Demand has been affected by uncertainty in the financial services sector and constraints on corporate budgets. In more expensive parts of the market, the high cost of stamp duty has also made renting look comparatively more attractive. It has also come from increased competition from new build stock, acquired by cash-rich investors and, to a lesser degree, an increasingly sophisticated build to rent sector.

Can we expect a rental recovery? After the previous fall, the market has recovered within five years. In each case, the market struggled to rise above those highs. The ability to provide such a recovery over the next five years partly depends on what Brexit will mean for London’s high-value employment markets. But looking on the existing path of development, we expect supply to remain an equally important factor.