The Eurozone crisis and weakening economy has undoubtedly resulted in a reduction of jobs in the financial sector.
From 354,000 in 2007, the number of jobs in London has fallen to 255,000, according to the figures released by the Centre for Economics and Business Research.
These job losses are hitting the city’s rental market, with 0.4 percent decline noted in August.
In July, the prime central rents fell 0.8 percent, the biggest drop since April 2011, according to real estate agency Knight Frank.
Low bonuses and rental budgets for corporate tenants are factors that have resulted in this drop, pointed out Liam Bailey, Head of Knight Frank Residential Research. “Rental budgets for corporate tenants, employees who have been relocated to London by their firms, have been cut back by anything up to 15 percent over the past 12 months,” he said.
The agency’s report showed that rents have dropped more for houses than for apartments, with a steep fall of 2.8 percent being recorded in the £1,500 (approximately $2,300) per week bracket than in the £500 (approximately $800) to £1,500 per week range.
“Our view is that the current weakness in headline rents is not evidence of a wider downturn in demand from tenants. Rather it is that affordability constraints are limiting the scope for rental growth, and that the weaker performance of London’s economy is effectively resetting rental levels downwards,” the report said.
Despite declining rentals, the market saw a 30 percent increase in volume compared to last year, mostly in sub--£1,000 category. In July, the volume of new applicants was higher by two percent in July and viewing volumes escalated 13 percent.
According to Bailey, activity was stronger in the £1,000 a week bracket. “The sub-£1,000 a week bracket has seen more demand recently as people have been tightening their budgets, with both individual tenants and companies housing corporate tenants.”
Moreover, the report points out that this increase in activity projects a positive picture of the UK rental market. It “reflects a broader shift in favor of the rental sector across the UK, due to the lack of mortgage market funding for new entrants in the owner-occupier market,” the report said.
