As the rental market rapidly soars tenants are being forced to reduce rents or take the risk of losing their tenants. This is due to the amount of homeowners who are now renting out their properties rather than selling them for a cut price.
There was a rush of so called "accidental landlords" last year as decreasing house prices influenced homeowners to delay the sale of their property. This is caused a lot of competition in the rental market and put pressure on rents.
However, corporate demand has decreased as fewer businesses bring new employees into the UK. According to agents, rents have been slashed by approximately 20 percent. In some parts of London this has been as much as 30 percent. Properties have been left empty as tenants move out to find better properties for the same price.
"It has been harder than expected for many accidental landlords," says the lettings director at Knight Frank, the estate agent. "It depends what area and what price range they are in but tenants are trying to knock 10-30 per cent off asking prices in some cases and are even renegotiating mid-term."
There is significant activity in the market, according to them; the number of like-for-like lets has also risen on last year. There is still an imbalance between the number of people looking to rent and the number of properties available. Knight Frank. On average, has twice the amount of rental stock it had this time last year.
Savills and Hamptons International, also have a lot of properties for rent, which they say is forcing reductions in rents. "Anyone who has had a vacant property would have experienced a rent reduction in recent months," says Mrs Gordon, head of lettings at Savills. "We are seeing applicants negotiating heavily to get a property and making multiple offers."
Tenants who took out a contract just 6 months ago are asking landlords to renegotiate rents. They are using the six month break clause in their contract to see if they can get a better deal. "They might exercise the break and go," says Mrs Gordon. "In London, people are moving into more central areas because they can get a much better property for the same price."
Not all areas of the market are experiencing the same problems. Agents say tenants are obtaining discounts only where there is oversupply, and some sectors are in fact still seeing a shortage of stock. Other areas are not as bad as central London, which is down by about 15 percent. The area with the largest drop off in demand is the top end of the market.
Knight Frank says that properties priced at more than 1,000 pounds a week are harder to let. As unemployment rises corporate lettings are also suffering. Accommodation budgets for staff are also been cut by businesses.
She says some large companies may relocate their employees unless the landlord cuts rents by several hundred pounds a week. "People relying heavily on the corporate market have to renegotiate quite substantially." The biggest fear for landlords is whether they will be able to meet their mortgage repayments, as they may find they are not earning enough to cover their payments.
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