Foxton chief points to policy changes in the BTL space for declining supply
Renters in London may be forced out of the capital due to a shortage of rental options.
Guy Gittens, chief executive of Foxton, said the supply issue is due to policy changes in the buy-to-let space. The government has continued to enforce increased regulation on the buy-to-let market, which has resulted in some landlords deciding to exit the market, reducing supply, Gittens suggested.
However, while experts agreed declining supply will lead to renters moving outside of the capital, they believe the appeal of London will not falter enough to create an oversupply of property which would result in declining prices.
Desirability of London
Iwona Hovenko (pictured), real estate analyst at Bloomberg Intelligence, said London is one of the top global cities where rental demand from a variety of tenants, such as students, professionals or short-stay rentals, far outstrips the supply of homes to rent, especially amid the exit of some of the smaller private buy-to-let landlords.
“The city’s vibrant jobs market, social life and culture continue attracting people from all over the world,” she added.
While Hovenko believes some people may decide to leave London in search of a more affordable location, either to buy or to rent, she said this would only ease some of the severe shortage of rental properties in the capital, rather than lead to an oversupply that could depress house prices. She therefore does not envision a near-term mass exodus of tenants from London that could have a major ripple effect on house prices in the city.
“What may happen instead is rent-growth slowing as tenants’ ability to pay higher rents becomes more limited,” Hovenko said.
Hovenko said a much bigger issue for London’s house prices remains poor affordability, the still relatively-high mortgage rates, as well as hefty stamp duty bills.
“The years of Brexit jitters and political upheaval have also removed some of its lustre that may take some effort to restore,” Hovenko said.
Race for space
Samuel Morris, lending associate at TAB, said lockdown reinforced how valuable open space is for borrowers. He added that the race for space and rising rents have taken some of the shine off living in the city.
“Plenty of tenants have realised that adding another 15 or 20 minutes to a commute, that they may be undertaking less regularly with the rise of remote working, really is not that much of a hardship,” Morris said.
He said that it has never been easier to navigate the country with more infrastructure links being created year-on-year, such as the implementation of Crossrail.
“However, I am not sure I would say there has been a mass exodus of tenants either though, and I would be surprised if there was a significant knock-on effect on the capital’s house prices,” Morris said.
Morris said London is still one of the most sought-after locations for foreign investors, and while he believes some existing residents may wish to move out, he added that there will always be someone with their chequebook ready and willing to move in.
Meanwhile, Lee Moran, business development manager at TAB, said, as with many global cities, the ‘draw’ of living in London outweighs the price tag that comes with it.
“HMO’s especially will remain buoyant as young professionals still want to live as centrally as possible and live the ‘London lifestyle’,” he said.
As such, Moran said he cannot see the London house market dropping very far.
How do you expect declining supply in the capital’s rental market to impact house prices in London? Let us know in the comment section below.
