London’s fanciest houses are vacant, even when rents fall

Photographer: Hollie Adams / Bloomberg

London’s luxury housing market is experiencing a lonely lockdown.

Homes in the most expensive parts of the capital are vacant for more than two months before finding tenants, longest wait since last financial crisis, according to real estate data company LonRes. And this despite the fact that rents have recently fallen at the fastest annual rate in ten years.

An exodus of office workers and a shortage of visitors around the world has hammered chic hot spots like Mayfair and Knightsbridge, forcing landlords to lower their rents or see their properties vacant. The number of luxury pillows for rent in central London has increased by 75% compared to a year earlier.

For owners of the multi-million pound houses, it could be a long winter. Restrictions resumed or tightened during the last national lockdown that started this month will likely put a ceiling on rent for some time to come.

“It will probably be a few more months where you will accept lower rents than you may have historically,” said Marcus Dixon, head of research at LonRes. “The point is that landlords have to equip this.”

As the government rushes to vaccinate the population against the virus and put the country on the path to something resembling normalcy, Dixon is hopeful that a recovery remains in sight. The following four graphs show just how much of a challenge the capital’s high-end market faces.

Nobody is home

Covid is forcing landlords to leave their properties empty for longer

Source: LonRes

Because the leases expired last year and the pandemic kept new residents at bay, a stream of vacant homes came onto the market. Landlords have also struggled to fill short-term rental properties that are popular with tourists as well as international students, employees and visitors. That doesn’t seem to be improving any time soon, as the government closed all travel corridors this week.

Rich harvest

It is a tenants’ market in London’s most expensive areas

Source: LonRes

Luxury rents in London are showing the largest annual declines since the aftermath of the financial crisis, with a decline of more than 14% in the capital in December compared to a year earlier. Not only the city center suffers; the suburbs see the steepest falls, as wealthy renters choose to live even further away than the suburbs, Dixon said.

Make an offer

Discounts for luxury rentals in London have skyrocketed last year

Source: LonRes

Now is a good time to negotiate. Tenants looking to live in London’s fanciest homes are getting nearly three times the discount it had before the pandemic, with more than half of tenants managing to lower the price. “Landlords obviously want to try to minimize the void,” said Dixon. “But the reality of the current situation is that there have not been that many tenants in the area, and those tenants may be more picky.”

Rich misery

The high-end sales market in London has struggled to recover for years

Source: LonRes

Sellers don’t fare much better than landlords. Before the coronavirus hit London, the sales market briefly experienced two quarters of growth before prices dropped, continuing an overall decline that has been going on for years. The jury is not yet out on the prospects for recovery; LonRes points to the resilience of the market just before the breakout as a reason to be optimistic.