The cost of renting an apartment in London could drop for the first time in years in the fallout of the COVID-19 pandemic, one analyst suggests
The cost of renting an apartment in London could drop for the first time in years in the fallout of the COVID-19 pandemic, one analyst suggests, but by how much remains an open question.
It’s a little too early to tell right now what’s going to happen in certain markets across Canada, said Matt Danison of national rental-advertising and tracking website Rentals.ca, but we expect rentals to decline in the coming months across the country, not in just one place.
Each market will behave differently, but the fallout of the pandemic will certainly bring the national average for rent down, said Danison, executive director of Rentals.ca.
No downward trend was visible in London last month, when the coronavirus pandemic was declared and social isolation and lockdowns began. The average rent for one-bedroom apartments available that month rose slightly, by 0.5 per cent.
That put the average monthly rent for such units at $1,189, which represents a year-over-year increase of 27.2 per cent, according to Rentals.ca’s tracking data.
But in London, as elsewhere in the country, there are some early signs of the effect the pandemic is having on a rental market that was only expected to go up in 2020.
Among them is an increase in the number of short-term rental units, such as those rented through services such as Airbnb, being advertised for longer-term contracts, Danison said.
That could help ease some of the pressure in London’s rental market, which has been marked by a low vacancy rate (1.8 per cent in 2019) that has helped push prices up, Danison added.
Don’t expect London vacancy rates to soar, he said. But the longer the pandemic lasts, the more likely short-term rentals will be forced into the longer-term market,
I don’t think . . . the vacancy rates are going to, all of a sudden, go from 1.8 per cent to 10 per cent, he said. (But) the longer this goes on, the more those short-term rentals won’t be able to survive, and they’ll be forced to put into the long term stock. And once they are signed up for a year lease, you know, they’re locked in and now that short term rental is taken off the market.
Danison said he expects to see the biggest drop in prices to come in the market’s luxury end, as families grapple with the fallout of the pandemic on their finances.
You have people that have been laid off, or you have a couple, and one of them loses a job, and all of sudden they can’t afford the rent, he said.
Other key demand indicators that affect rental markets have also started to slow down in London, said Andrew Scott, a senior analyst with the Canada Mortgage and Housing Corp. (CMHC).
He pointed to London’s unemployment rate, which jumped by almost a full percentage point to 5.8 per cent in March, as an example.
The number of people who move into the city could also be down this year, Scott added.
London’s population’s growth was also being driven by a lot of migration, and migration is heavily impacted by (the virus) right now, he said.
But for Scott, only one indicator – how long the pandemic lasts – matters for the fallout in the rental market.
A lot of those demand fundamentals have weakened quite a bit, he said. What that turns into is hard to say exactly right now because it depends on how long this lasts and that’s still a big question mark.
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