Changes in the Real Estate Costs
What will happen to apartment rental prices in London after Brexit? This is one of the most commonly asked questions recently. The UK is set to leave the EU on 29 March 2019 after voting to leave by nearly 52% to 48% - 17.4m votes to 16.1m - in 2016. The decisions the MPs are about to make, will shape the UK's economy and society for decades to come, influencing incomes, job prospects and much more. No matter how things turn out, the residents of London will always be able to best rated end of tenancy cleaning London with the help of our company.
Many fear a no-deal Brexit will cause chaos at ports, disruption to food and medical supplies and long-term economic damage, with big multinational companies moving out of the UK. Others say these fears are exaggerated and that the UK will thrive, when it has made a clean break from the EU. On top of this, the “Irish backstop” clause continues to raise lots of question marks over. The two sides have to agree on a trade deal by December 2020 - and it is meant to be temporary. Long story short - those are really interesting times to live in.
Uncertainty for the Citizens
Even though the PM Theresa May may still have no deal with the other MPs, this doesn’t mean that you shouldn’t shake hands with your rentier. According to some opinions, London is becoming a slightly less attractive place to live as business investments are very much on hold, waiting for political certainty, and that is putting people off. Still, the population of the UK is expected to grow in the upcoming years, which means more people looking for a shelter. Definitely, the uncertainty, which the Brexit brings, will continue to be the black cloud hanging over Great Britain. While waiting for the rain to pour, the prices of the lettings are actually raising.
On one hand, we have already mentioned the increase of the population, but the other significant factor is the fear of buying your own home. According to a study from Santander Mortgages, which compares monthly mortgage payments with expected raising in rent prices, prospective first-time buyers could make an average saving of £2,268 per year if they move from renting to owning. Average mortgage payments run up to £723, while average rents in the UK are £912. To get on the property ladder though, you’d require an average of £51,000 for a deposit. In London, the potential savings are greatest: the average monthly rent is £289 more than the comparable mortgage payments, adding up to a potential £3,500 annual savings. However, according to the report, those first-time buyers would need a deposit of £135,000 in order to access mortgage deals of that price.
Trouble for the Millenials
Even though, owning a home is cheaper than renting, raising interest rates on mortgage loans and the insecurity, caused by the current political situation, leads to a revival of rents. The UK homeownership rate has slumped from 73 percent a decade ago, to just 63 percent today. For those born after 1980 – the millennial generation – the ownership rate collapsed even more dramatically, mainly thanks to fast-rising house prices and the meager wage growth since the financial crisis. Lots of studies are talking about the Post-Ownership era, which leaves the common phrase “An Englishman's home is his castle” in the good, old past. Millennials are set to rent for the rest of their lives. In the past 15 years, the number of families living in assured shorthold tenancies has tripled to 1.8 million. Actually according to studies - a third of UK’s millennials will ‘rent into retirement’. And that’s good news for landlords, who will see increased demand for rentals, as some people are priced out of buying a home by higher interest rates. Private renting became prevalent, both out of need and out of choice.
Even though for the elder citizens of Britain broken home-ownership dreams may sound like a horrifying nightmare, this is just the norm for countries like Germany and Netherlands. The rates in the USA also show a significant decrease in the percent of households, which own their own home.
Benefits for the Leaseholders
Theresa May’s ‘British dream’ of home ownership is impossible for millions of millennials. In an era of relatively low-interest rates and tighter financial controls, on how much people can borrow from banks to purchase homes, renting seems much more appealing. While current rules are too favorable to the landlord, the core issue is that the generation rent is here to stay, so changes in the tenancy rules are bought to happen – this time in favor of the leaseholders.
Back at the capital London, rents are rising almost three times faster than wages, according to research by the GMB union. The UK capital is one of the most expensive cities not only in the old continent but in the world as well. Of course, the Big Smoke is the top high-priced venue, when it comes to Great Britain. A combination of Brexit uncertainty, lack of stability in the financial sector, crippling deposits, reluctant buyers and the surge in expensive build-to-rent homes is set to push rents up faster than house prices. According to property group Savills, tenants will face a 15.9 percent rise in rents in London by 2023, compared to house pricing growth of 4.5 percent over the same period of time. Warren Kenny, the GMB’s London regional secretary, called on employers to pay higher wages to staff to enable them to rent. In his statement, he pointed out, that there is a massive shortage of lettings at reasonable prices regarding workers in the lower pay grades. The only way to keep up with higher rents are higher wages, he added.
Finding a Solution
Having all of the above in mind, we can still find the light at the end of the tunnel. Rental price growth in London is almost 3% lower than the projected rate of growth since the EU referendum announcement, leaving tenants with more money at the end of the month. London’s residential stock recorded a 1.5% fall – the first since 2009. According to an analysis of more than 100,000 rental properties, listed on the Zoopla property website, tenants in London have saved as much as £1,800 in rent as a result of the Brexit referendum in 2016.
Reduced demand of rental properties from the EU migrants, higher levels of internal migration within the UK (as more young adults leave the capital for other lower-priced cities like Birmingham and Manchester), and the expected jobs relocation to other European cities after England leaves the EU, formed the term “£1,800 Brexit dividend”. All of the above makes landlords think twice before raising the rents.
John Goodall, the chief executive of Landbay, said: It’s hard to ignore the impact that the vote to leave the EU has had on the property market in London. While tenants are better off, without necessarily realizing it, uncertainty in the market has caused a conundrum for landlords. He added that many of the property owners preferred not to raise rents, despite government’s punitive tax regime, in order to maintain a steady income.
Surveys and Researches
According to last Residential Market Survey made by RICS, the looming threat of Brexit has dragged down the UK property market further, with prices falling at the fastest rate in six years and the outlook for sales being the weakest in two decades. Sales expectations were either flat or negative in every region of the UK for the period from January to March, when the UK is scheduled to leave the EU. This doesn’t seem to stop the rise in rental properties though, but at least the upraise is significantly lower. According to Statista, the gap between rental prices in the capital's districts will grow. In the course of the next five years, leases in Greater London will be with 7 percent higher compared to those in Prime Central London.
Last year TotallyMoney published a map, showing what will be the difference in your rental price, according to your distance from central stations on the London Tube. Knowing that living closer to work or at least near comfortable station remains one of the most important considerations that you might have in mind, when looking for a place to lay your head, we decided to show you how things look like now in the month of Brexit. We’ve gathered data from some of the biggest property websites (Zoopla & Rightmove) to measure if and how the letting prices have been changed by the political situation. We compared the cost of leases alongside each of the lines of the London Tube. All the properties taken in mind are 1 bedroom flats, standing no more than ¼ miles from the chosen station, that were published this month.
The results show that prices are going up with uneven rate, varying from 0.99% to 14.7%. The average weekly rent of properties around Knightsbridge is the most expensive one - £833.50. The cheapest option would be a flat near East Acton – average weekly rent only 183.40 pounds. Living close to Grange Hill will cost you 91.44% more this month than previous year and if you’re looking for the biggest discount try Turnham Green and gain 34.71% or 34.37%, depending on which Tube Line you’re interested in – Piccadilly or District.
Central Underground Tube Line
Unsurprisingly, rent prices alongside Central Underground Tube Line have risen the most - 14.7% to be precise. There’s a slight decrease in the cost of the properties near Oxford Circus thought. Average weekly rent for 2018 was £636.00 and this March it would cost you £615.00. The difference is only 3.3%, but those are extra 84 pounds in your bank account each month. To live near Greenford was the perfect option last year, with an average lease of £146 and 26 minutes apart from Oxford Circus. Now you might consider East Acton to be the best deal since it gives you 9 extra minutes and offers the lowest property price alongside Central Tube Line this March - £183.4. To live near St. Paul's is the most expensive option. This will leave you in a 7 minutes distance from Oxford Circus and your average weekly rent would be £720.15 or 40.65% higher than the one you would pay last year.
District of Essex
The biggest difference in the cost of leases is in the district of Essex. Rentals there are 91.44% higher, in other words, you’ll have to pay about 200 pounds more for a weekly rent compared to the last 12 months. A new home near Lancaster Gate might be a good idea too, since the station is only 5 minutes away from Oxford Circus and there is 15.78% decrease in the prices offered by the landlords. Your average weekly rent this March would be only £366.35, compared to £435 previously – this deal will make you richer with approximately 275 pounds in just a month.
Hammersmith & City Tube Line
You’ll have to look really closely, when it comes to Hammersmith & City Tube Line. Average percent difference in rent prices is below 1 – just 0.99%. To live close to Great Portland Street is no longer the most expensive option. This March you can save around £50 of your monthly rent. If you choose Hammersmith, this will leave you with at least 480 extra pounds at the end of the 30 days period. The rent cost here has been decreased by 25.13%. The cheapest option to live near this line’s stations would be Barking. Your average weekly rent in the area would be 238.30 pounds. Moorgate might be 11 minutes away from Great Portland Street, but living here will cost you £544.50 every 7 days or 13.6% more than last year. Living near Royal Oak is not only further, but costlier – at least when we’re taking in mind the percentage increase of 25.09% - the highest for this line.
Piccadilly and Northern
Piccadilly and Northern are the longest tube lines with 50 stations each, that is why the chance to live somewhere near them is the highest. The average percentage rise in weekly rents alongside Piccadilly is only 4.08%. The biggest decrease can be found at Turnham Green – 34.71%, which will save you approximately 715 pounds a month. The cost of a property in its radius is £336.90 per 7 days. The cheapest station to live around would be Hounslow West - £194.80 weekly rent and 34 minutes distance from Hyde Park Corner. The properties in the district of Knightsbridge mark 25.91% increase, so living near this area will cost you the most - £833.50 every 7 days. Hatton Cross used to be the cheapest option last year, this March however we can measure the biggest increase here - 67.93% or an average of 82 pounds more each week.
North London Area
The price of the properties alongside Northern has increased with 10.66%. To live near Camden Town will cost you about 71.32% more or an extra 255 pounds a week. Properties in the district of Burnt Oak have the biggest rate on the other side of the scale, pointing 9.49% down. When it comes to money, weekly rentals in the area of Morden remain the cheapest, with £210.00 last year and even less now - £209.15. This March, living near Bank will cost you the most - £651.55 even though it would leave you 12 minutes away from Leicester Square.
- If you’re looking for a property around the Metropolitan station, you should know that the average increase here is 3.52%. Living close to Liverpool Street will cost you the most this month - £527.10 per week, although the station is 13 minutes away from Great Portland Street. The cheapest option is a property near Eastcote – you’ll have to pay only about £199 every 7 days.
- The percent rise in the average cost of the rents is higher alongside the Jubilee line – 9.02%. The cheapest flats can be found near Canons Park - £242.40 a week. The most expensive area remains the one around Green Park with a 6.42% increase or extra 40 pounds weekly. This March the properties there have an average value of £666.20.
- 2.58% is the average rise in weekly properties rents alongside District Tube Line. The area of Dagenham Heathway offers the cheapest rents with an average cost of 204 pounds a week. The Monument might be far from Stamford Brook, 39 minutes to be precise, but living nearby will cost you most - £685.25 every 7 days. The price of the properties close to Elm Park has been increased with 60.97%, while living near Turnham Green is with 34.37% cheaper.
- Oxford Circus remains the most expensive area to live around Bakerloo Line, although the rents here are with 1.63% lower this month. This means that about £625 will go to your landlord each week. The cheapest station to live around is Harrow & Wealdstone - the £224 weekly rent means that every 7 days you’ll pay with 36 pounds more than last year. Back then, Kenton used to lead this chart with £188 lease per week, with the current price being £235.
- Last but not least, we’re heading to Victoria Line. Average percent rage of properties is 4.36%. The most expensive station to live around remains Oxford Circus. This month, the rise in the cost of the properties here is 4.32% or nearly 30 pounds. Your weekly rent will be approximately £663.50. The cheapest option offered by this line is the area of Walthamstow Central with average weekly rent of £231.55.