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London rental market yet to feel full effect of COVID-19

Christian Fernsby |
The global pandemic is yet to influence rental prices for expats living in London, according to global mobility expert ECA International, as economies adjust to the impact of COVID-19.

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While London maintains its position as the most expensive location in Europe to rent for the fifth year in a row, and fourth in the world, the landscape is set to change as cities navigate their way through the latter stages of the global pandemic. Though London’s expat renters experienced a rise of £56 per month, it’s considerably less than the rental increase in 2020 (£121 per month).

The average cost of a three-bedroom, mid-range home in a prime London location for expatriates is now £5,364 per month (USD 6,933), according to ECA’s latest Accommodation Ranking report.

“As expected, the Covid-19 pandemic is set to influence rental prices in London, but the full extent of this is still yet to be seen. Future falls in rents are expected in prime central districts, and it’s likely some level of remote working will remain across many industries post-pandemic. A central location is therefore likely to move down the list of priorities for many expat renters, with larger properties and outdoor space becoming more attractive,” said Alec Smith, Accommodation Services Manager at ECA International.

Manchester, the UK’s second most expensive city, has seen a monthly rental increase of £39. Meanwhile Birmingham, which is a staggering 184% cheaper per month than London, has seen rent go up by £54 per month, more than double the increase the city experienced in 2020 (£25).

The average cost of a three-bedroom central home in Manchester, ranked 28th in Europe, is £1,913 (USD 2,472) and in Birmingham, ranked 31st, £1,885 (USD 2,436).

Smith said: “The construction of HS2 is still increasing corporate confidence in Birmingham, and therefore demand for accommodation is driving up rental prices, despite ongoing delays. We’re seeing more business growth in large UK cities outside of London, with organisations choosing to open or relocate operations in the UK, particularly in Manchester.”

Though the second cheapest city for expats to rent in the UK, Glasgow, ranked 68th in Europe, has seen the highest rental increase in the UK of £73 per month, while Aberdeen, ranked 69th in Europe has increased by a moderate £20 per month.

Smith said: “Glasgow is increasingly becoming an attractive option for young professionals; with properties being built in prime locations targeted at this demographic, which is driving up the rental market price, reflected in our latest findings. Rent is likely to continue to rise, as Glasgow City Council commits to increase the core city centre population by 40,000 by 2035.”

“Though Aberdeen’s slowing oil and gas industry saw the Scottish city drop last year to its lowest ranking since 2012, we’ve since seen a slight upturn, as the market dropped to such a degree that it has since rebounded. Furthermore, recent legislation, which strengthens tenants’ rights, has increased confidence in the market.” Smith concluded.

Edinburgh, the UK’s fourth most expensive city, sees a slowing in rental increase by just £29 per month, compared to the £106 per month increase experienced in 2020. Edinburgh dropped one place in the European ranking, now 44th.

The average cost of a three-bedroom home in Edinburgh is £1,664 (USD 2,150), in Glasgow is £1,187 (1,534), and in Aberdeen is £1,180 (USD 1,525).

Dublin remains the fifth most expensive city to rent in Europe, having experienced an increase of €119 per month, a 2.2% rise in 2020, though a slower rate of increase than experienced between 2019 and 2020, which was a staggering 6%.

The average rental cost of a three-bedroom central home in Dublin now €3,713, per month (USD 4,116), making it far costlier than other European capital cities such as Rome at €2,729 (USD 3,011), Berlin at €2,475 (USD 2,730) and Valencia at €1,600 (USD 1,765).

Smith noted: “Dublin remains a popular location for businesses to send staff on assignment, so demand continues to impact accommodation costs. In addition, ongoing building regulations which remain tight in Dublin makes supply slim in popular areas of the city.”

A non-mover, Paris ranks sixth most expensive in Europe with a rental increase of €76 per month, now costing €3,537 (USD 3,902). Hamburg, ranking 20th in Europe, also saw a steady rise in rental prices of €46 per month, now costing €2,470 (USD 2,725).

Smith added: “Though rental prices remained largely stable in Europe, the true impact of the Covid-19 pandemic on rent levels has not yet been seen. While many residents left cities to move further out or back home, the pandemic effectively froze many property markets instead of causing immediate downward pressure on rents.”

“The success of countries’ routes out of lockdown and back to some sort of normality will change how property markets react. Faster recoveries are likely to act as a brake on falling rents, but the economic damage of the last year is likely to lead to reductions in most major cities as incomes become squeezed and remote working persists. We anticipate city centres being most impacted by falling rents, with outer lying areas becoming more popular,” concluded Smith.

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