Are London Rents Actually Getting Cheaper?

Emily Tierney was living in a shared flat with a Norwegian girl in Old Street during the EU referendum. She was 27 and sick of renting, so when George Osborne said that exiting the EU would cause property prices to crash, she decided to vote Leave. Property prices didn't crash. But Emily's Norwegian flatmate decided to move back to Norway in the aftermath of the vote. "Even though Norway isn't even part of the EU," Tierney says.

Tierney decided to move in with her boyfriend. They contacted some estate agents in Wimbledon, who started showing them round flats. On one of these viewings, the estate agent let slip that the properties were renting for cheaper than the advertised rate because fewer people were looking to rent one-bedrooms since Brexit.

Eventually, the couple decided on a different flat that was going for £1,400 a month, despite having been earlier advertised at £1,500. After learning that rent was falling, Tierney decided to negotiate further. "I thought, 'Sod it, I may as well ask,'" she remembers. "I called them up and they said they would ask the landlord, but they couldn't see it being a problem."

The landlord agreed to £1,300 a month in rent. He also agreed to furnish the property, because after spending her adult life in shared homes, Tierney didn't have any furniture.

Tierney didn't just get lucky. London rents are falling. According to Your Move, an estate agent, by March the average monthly rent on a property in London was down £94 on the previous year.

Seven months of falling rent in London has also started to drag down the national average. By February, the cost of newly agreed rental contracts in the UK fell 0.6 percent, or £5, because of a 4.7 percent drop in London and a 2.6 percent drop in the south-east.

This may be news to most renting in London, where young people spend an average of 60 percent of their income on rent. This is partly because rent has increased faster than wages since the financial crisis. Numbers from Countrywide show that rent has increased 48 percent in London since 2007, while real wages have actually fallen below what they were before the crisis, making people feel poorer.

"In terms of affordability, London is right at the limits of what many people can afford," says Johnny Morris, research director at Countrywide. Statistics show the number of people struggling to afford rent is actually increasing. Your Move says the proportion of tenants in arrears increased to 9.1 percent of tenants in March from 8.1 percent a year earlier.

London rents started slowing last year after stamp duty, or the tax paid to the government on new homes, went up for second homes and buy-to-let properties. David Cameron's Conservative government proved to be more hostile towards landlords than many of the governments that preceded it. Before the rules changed in April of 2016, a sudden swell of second home-buyers rushed to buy property, to avoid paying an extra 3 percent in tax. That has increased the number of homes on the market for tenants, lowering the price of rent.

At the same time, house prices on some properties have stopped growing so quickly. If they are unable to get the price they want, property owners may choose to rent rather than sell.

"Rental growth slowed last year in London after the stamp duty hike in April, because there were suddenly a lot of homes on the market. Over the year, choice for tenants remained high but the overall numbers of tenants registering to let has fallen, so London rent growth slowed slightly then fell," Morris says.

The rental market is linked to the economy, so rent goes down when there's a slowdown in employment growth, income or migration. In times of uncertainty, like those since the referendum, fewer people want to rent more expensive properties. They are less likely to want the extra costs of moving, or the higher rent of living on their own rather than in a shared house.

This is one reason why you may not have noticed that London rents are falling. "While rents overall have fallen, they haven't for single rooms," Morris says.

The other is that your landlord is unlikely to voluntarily lower your rent. Estate agents are still putting properties on the market for higher prices than they were last year. "We always give the property a couple of weeks, maybe at a rent that is a little higher than last year's, and if we're not getting the activity then we advise dropping the rent a little bit," says Robert Brinkley of Brinkleys, an estate agent in Wimbledon. "Ultimately it's better to drop the prices than have a void period, where the property is empty."

Henry Pryor, a property analyst, says reliable tenants should know their worth. "Use the advantage of being a tenant for once to negotiate a lower rent as opposed to rolling over and agreeing to whatever they say," Pryor says. He adds that tenants should look at comparable rental prices in their area and negotiate when the contract comes up for review. "Just as the landlord has to have the nerve to say to you they want to put the rent up, you have the right to have a discussion about agreeing to something lower."

Morris says it's in the landlord's interest to look into it. "From a landlord's perspective there's a huge value in having a tenant who pays the rent on time and keeps the property really well looked after."

Tierney calculates she has spent £50,000 on rent since she moved to London after finishing university in Southampton five-and-a-half years ago. "I've never heard of rent going down, only going up," she says. "Since I have been in London, my rent has never been less than £650. Now I am living in a much nicer flat, not having to share with housemates, and I'm paying slightly less. I'm even managing to save a bit towards a deposit."

Emily's name has been changed.

@hazelsheffield