London’s luxury landlords cutting rents over Brexit
RENTS for luxury homes in central London’s best districts fell 5.1pc in February from a year earlier as the UK’s plan to quit the European Union discouraged companies from moving employees to the city, according to Knight Frank LLP.
The number of prime properties coming onto the market rose 24pc, exceeding the number of additional prospective tenants, the property broker said in a report. That was partly caused by higher stamp duty rates, which encouraged homeowners to rent out properties rather than selling them.
“The number of tenancies agreed is rising overall, but demand is weaker among senior executives due to wider economic uncertainty surrounding issues that include Brexit,” Tom Bill, head of London residential at Knight Frank, wrote.
Successive tax increases in 2014 and 2016 created a flood of new rental properties. Brexit-induced uncertainty has also added to the glut of properties as companies curb transfers of employees to the capital.
“Prime central London remains a tenants’ market and landlords are having to remain competitive on asking rents to minimise void periods,” Bill said.
Profits at London-based estate agency Foxtons meanwhile have more than halved as it said it expected the capital’s sluggish property market to remain “challenging” in 2017. The number of homes being sold by the agency slumped last year, knocking its pre-tax profit down to £18.8m, com- pared to £41m in 2015 – below analysts’ expectations.
Nic Budden, the chief executive, blamed uncertainty created by the EU referendum for the slowdown that “severely impacted” the market, and said as a result “buyers tend to sit on their hands and we’re seeing that”. Budden told analysts it would be “helpful” if house prices fell by “five, 10, 15pc, but it wouldn’t dramatically change the situation in central London”.
London’s housing market particularly has been affected by a hike in stamp duty in December 2014 for homes worth more than £925,000.
Sales at Foxtons fell by 11pc to £132.7m, largely due to a 23pc fall in revenue from the sale of houses, to £56m.
Foxton’s lettings business, which has grown in importance for the company, suffered a 1pc fall in revenue. It will be further affected by a British government plan to end letting fees, announced as part of the housing white paper earlier this year, which could come into force next year. The company said it was “too early to tell” what the outcome of this policy would be.
Budden said: “We were not immune to the decline in volumes, although our lettings business proved more resilient, whilst our mortgage broking business also performed well.
“We expect trading conditions to remain challenging throughout 2017. Should current sales activity continue through the remainder of this year, it is likely that 2017 sales volumes will be below last year.” (Bloomberg & Telegraph)