Luxury apartments in Knightsbridge, London.
Photographer: Hollie Adams / Bloomberg
Photographer: Hollie Adams / Bloomberg
London’s luxury housing market is experiencing a lonely blockade.
Houses in the most expensive areas of the capital are empty for more than two months before meeting tenants, the longest waiting period since the last financial crisis, according to the real estate data company LonRes. This is despite the recent drop in rents at the fastest annual rate in a decade.
An exodus of office workers and a scarcity of global visitors have reached ostentatious points of interest like Mayfair and Knightsbridge, forcing landlords to cut their rents or see their properties vacant. The number of luxury apartments for rent in central London has increased by 75% over the previous year.
For owners of multi-million pound homes, it can be a long winter. Restrictions that were resumed or increased in the last national blockade that started this month are likely to maintain a ceiling on rents for some time.
“It will probably take a few more months to accept lower rents than you have historically achieved,” said Marcus Dixon, head of research at LonRes. “It’s just about the owners’ need to resolve this.”
As the government races to vaccinate the population against the virus and put the country on a path back to something akin to normal, Dixon hopes that a recovery will remain in sight. The following four charts illustrate the challenges that the capital’s luxury market faces.
Nobody is home
Covid forces homeowners to leave their properties empty for longer
Source: LonRes
As rental contracts expired last year and the pandemic kept new residents away, a flood of empty homes hit the market. Owners have also struggled to fill short-term rental properties popular with tourists, as well as those for international students, workers and visitors. This does not look like it will improve anytime soon, with the government closing all travel corridors this week.
Rich Pickings
It’s a tenant market in London’s most expensive neighborhoods
Source: LonRes
London luxury rentals are experiencing the biggest annual falls since the aftermath of the financial crisis, plummeting by more than 14% in the capital in December, compared to the previous year. It is not just the city center that is suffering; the surrounding area is seeing the steepest falls, as wealthy tenants choose to live even further away than the suburbs, said Dixon.
Make an offer
Discounts skyrocketed for London luxury rentals last year
Source: LonRes
It is a good time to negotiate. Tenants looking to live in the most chic homes in London are getting almost three times the discount they got before the pandemic, with more than half of tenants managing to cut the price. “Owners obviously want to try to limit gaps as much as they can,” said Dixon. “But the reality of the current situation is that there aren’t that many tenants around, and those tenants can be more demanding.”
Woes rich
London’s luxury sales market has struggled to recover for years
Source: LonRes
Salespeople aren’t doing much better than owners. Before the coronavirus hit London, the sales market briefly enjoyed two quarters of growth before prices fell, continuing a general decline that has been occurring for years. Regarding the prospects for recovery, the jury has not yet decided; LonRes points to the market’s resilience just before the outbreak as one reason to be optimistic.