Real Estate Pays The Price For Immigration From London

For the first time in 30 years, London's population is falling after nearly 700,000 residents have left, and it has already been felt by the city's property market, as rents in central London have fallen sharply since the start of the pandemic, and the number of property sales in central areas has plummeted. Home in the capital, where international buyers have been turned away.

But will this be a short-lived regression or something more sustainable? As the vaccine rolls out, some experts believe that overseas renters and buyers will return in droves once stores and businesses reopen.

Others believe that underlying economic conditions, along with the impact of Brexit, suggest a long-term decline in demand for London property, which will create a drag on house prices that could persist beyond the end of the pandemic.

Exodus Swings Rents:

In the 12 months to October, average rents in London fell 6.9 percent, according to property portal ZPG. In Chelsea and Kensington, which have some of the most expensive real estate in the capital, average rents fell by 10.2 percent. Real Estate in London, was down by 15 percent.

To counteract the sharp drop in demand, some landlords are forced to cut prices to attract tenants. Across central London, discounts of more than 25 percent are becoming relatively common, according to homes listed for rent at ZPG, where a one-bedroom apartment near Piccadilly Circus has cut the asking price by 43.8 percent to £1,950 a month.

What's Next?:

London house prices have risen since the first lockdown ended, particularly in the outer boroughs, as lockdown-weary buyers look for more space and their own garden. Since July, property sales have been boosted by the government stamp duty holiday that has waived fees for the first £500,000 when buying a home until March 31, providing buyers with up to £15,000 worth of value.

Official figures, published by the Office for National Statistics and drawn from Land Registry data, show London prices rose 9.7 percent through November, to an average of £514,000.

But Richard Donnell, director of research at ZPG, says land registry data has been volatile lately, due to the fact that more expensive homes have been sold, rather than apartments.

In October, for example, Office for National Statistics figures show prices rose 3.9 percent to £491,000, so a £23,000 increase in the average London home value within a month is unlikely, he says. Donnell.

Close Orgasms:

The ZPG house price index for November indicates that the price in London has grown by just 3 percent in the past 12 months, with neighborhoods such as Merton and Sutton showing the biggest gains.

Despite the price hikes in the past year, tremors in the rental market could soon begin to appear in the sales market, says Neil Hudson, UK housing market analyst.

This could release a batch of unprofitable properties for purchase, which would hit the market, potentially putting downward pressure on local home prices.

In the meantime, the loss of thousands of tenants will affect future sales as well, as the rapid recovery in the population, which would restore housing demand depends on the return of the departed masses. But even if the pandemic is contained, the tens of thousands of jobs lost in the hospitality sector will not return overnight, as foreign labor makes up a large part of the sector.

The New Immigration System:

A new points-based immigration system, recently introduced after Brexit, has added hurdles for EU migrants, and is expected to reduce moving numbers to London in the long term.

Meanwhile, more Londoners are leaving the city and buying homes elsewhere, with property agency Hamptons International estimating that departures from London bought 73,950 homes outside the capital last year, the highest number since 2016 and the highest percentage of sales outside London since before the financial crisis.

“Relatively speaking, the share of homes outside the capital bought by individuals from London was 7.5 percent, the highest level since 2007 when it was 8.2 percent,” says Aneisha Beveridge, head of research at Hampton.

Ministers may step in to prop up the housing market again in 2021, and historically low - interest rates appear likely to hone the attractiveness of real estate for some time. However, real estate agencies expect very limited price growth this year.

London prices eroding?:

While ONS figures show London prices are advancing, according to ZPG, house price growth in London last year was slower than almost every other region in the UK, driven by lower stamp duty, with prices in the North West rising by 5 percent. percent; In the Southwest, it rose by 3.6 percent.

After the stamp duty holiday ends on March 31, most real estate agents are expecting a sharp drop in activity. In London, the impact will be greater if the city's population continues to shrink. According to a paper by independent research house Carraighill, which analyzes data for the new points-based immigration system in the housing market, this is a real possibility.