Home Property City job losses 'hit London rental rates'

City job losses 'hit London rental rates'

by Deleted Subscriber Content
13th Feb 12 3:53 pm

Job losses and cutbacks in the City of London have caused residential rents in London to fall in January compared to the previous month, according to research.

Rental rates in the heart of the capital are now 0.6 per cent below September last year, when they hit their peak, according to estate agent Knight Frank. But central London rates are seven per cent higher than they were in January last year.

Knight Frank head of residential research Liam Bailey said that although falling rates in the winter are not uncommon, job cuts in the City and general concerns about affordability of property among tenants played a part in the monthly drop in rents.

“There are signs that the weakness in the City of London jobs market, where new employment vacancies are down 51 per cent year-on-year at the current time (according to Morgan McKinley), is beginning to feed through to the rental sector,” said Bailey.

People currently in the rental market may be looking to cut general costs so they can afford to get onto the property ladder, but the banking sector is expected to offer much lower bonuses in the first three months of this year, compared to 2011, he said. But the estate agent believes rents will begin to increase again from the spring onwards.

“Additionally, rental budgets for corporate tenants, employees who have been relocated to London by their firms, have been cut back by anything up to 15 per cent over the past 12 months,” Bailey said in a statement.

“The other main driver helping to push rents lower is affordability. Tenants saw rents rise 27 per cent in the two years to September 2011 – hitting all-time highs at that point. At best, disposable income even in central London, only rose by around 8 per cent over the same period – landlords are having to accept that continually rising rents are not a fixture of the market.”

London’s financial services companies have come under pressure from the eurozone debt crisis and politicians who believe financiers are to blame for the global economic downturn, the report said. Financial firms in the UK cut 58,000 jobs last year, more than any other country in the world.

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