London’s most elegant houses are empty even when rents fall

Photographer: Hollie Adams / Bloomberg

The London luxury housing market is enduring a solitary blockade.

Houses in the most expensive areas of the capital remain empty for more than two months before finding tenants, the longest waiting period since the last financial crisis, according to the real estate data company LonRes. And this despite the fact that rents have recently fallen at the fastest annual rate in a decade.

An exodus of office workers and a shortage of global visitors has marked hot spots such as Mayfair and Knightsbridge, forcing landlords to cut their rents or see their properties remain unoccupied. The number of luxury bearings that can be rented in central London has increased by 75% over the previous year.

For the owners of the multi-million free houses, it could be a long winter. It is likely that the restrictions that were resumed or tightened in the last national blockade that began this month would maintain a rental limit for some time yet.

“It will probably take another few months to accept lower rents than you may have historically,” said Marcus Dixon, head of research at LonRes. “It’s just the need for the owners to do it.”

As the government rushes to vaccinate the population against the virus and put the country on a path to something that looks like normalcy, Dixon hopes a recovery will be maintained. The following four graphs illustrate the extent to which a challenge to the capital’s high-end market.

As leases expired last year and the pandemic kept new residents away, a flood of vacant homes entered the market. Landlords have also struggled to fill short-term rental properties popular with tourists, as well as for students, workers and international visitors. It looks like this won’t improve anytime soon, as the government will close all travel corridors this week.

London’s luxury rents are experiencing the largest annual slides since the aftermath of the financial crisis, which fell more than 14% in the capital in December compared to a year earlier. Not only does it suffer from the city center; Dixon said the suburbs see the strongest falls as wealthy tenants choose to live even further than the suburbs.

This is a good time to negotiate. Tenants who want to live in London’s most luxurious homes are nearly three times the discount they had gotten before the pandemic, with more than half of the tenants defeating the price. “Obviously, homeowners want to try to limit gaps as much as they can,” Dixon said. “But the reality of the current situation is that there haven’t been so many tenants around, and those tenants may be more demanding.”

Sellers are not much better than owners. Before the coronavirus reached London, the sales market briefly enjoyed two-quarters of growth before prices fell, continuing a global decline that unfolded for years. As for recovery prospects, the jury is still out; LonRes points to market resistance just before the outbreak as one of the reasons for being bullish.