London renters may have to 'move further out and compromise on lifestyles'

Foxtons boss says there is a finite supply of properties amid huge demand

The Abbey Wood district of London. Consistent declines in available rental homes and a lettings frenzy drove record rental growth in 2022, JLL said. Bloomberg

The boss of one of the UK's largest estate agent groups has said that renters in London may be forced to move further out of the capital and make significant adjustments to their lifestyles.

“Sadly, and we absolutely don't welcome this, people are going to have to move further out, they're going to have to compromise on what they're living in and they're going to have to compromise on their lifestyles,” Guy Gittins, Group Chief Executive of Foxtons, told the BBC.

“There is still only a finite stock level supply, so there are still people living in these (inner London) properties because there's such huge demand for them.

“But people who are being priced out of an area that they wanted to live in are going to have to compromise on the property type or on their location.”

Mr Gittins' comments were backed up by a recent report into the London rental market by real estate advisory firm JLL.

“Consistent declines in available rental homes and a lettings frenzy drove record rental growth in 2022,” the report said.

“The number of listings fell 35 per cent compared to pre-pandemic levels in 2019 and rents rose 21 per cent from the end of 2019 to the end of 2022.”

A Foxtons Group Plc estate agent "Let" sign outside a residential property in the Queen's Park district of London, UK. Photographer: Hollie Adams / Bloomberg

Favourable market later in 2023

Meanwhile, Foxtons posted a 112 per cent rise in annual pre-tax profits to £11.9 million for 2022, on an 11 per cent rise in revenue to £140.3 million.

On the sales side, Foxtons expects the UK housing market to turn favourable in the latter part of 2023, if, as predicted, interest rates begin to ease.

Sales have slowed markedly over the past six months, as higher mortgage rates and broader economic concerns drive homebuyers away.

“Mortgage rates have started to reduce in recent weeks and buyer activity is picking up, which may result in a more favourable sales market in the latter part of the year,” Foxtons said.

Foxtons expects the UK housing market to turn favourable in the latter part of 2023. Bloomberg

House prices still struggling

Also released on Tuesday was the latest House Price Index from Halifax, showing that the average home in the UK cost £285,476, up 2.1 per cent on the same month last year.

Across the UK, property values increased by 1.1 per cent month on month in February, accelerating from 0.2 per cent growth in January, Halifax said.

“In cash terms, house prices are down around £8,500 (2.9 per cent) on the August 2022 peak, but remain almost £9,000 above the average prices seen at the start of 2022 and are still above pre-pandemic levels, meaning most sellers will retain price gains made during the pandemic,” said Kim Kinnaird of Halifax Mortgages.

“With average house prices remaining high housing affordability will continue to feel challenging for many buyers.”

Average house prices in London have fallen by 0.9 per cent over the past year, possibly affected by the capital's large proportion of flats, according to Halifax's analysis.

The average house price in London in February was £526,842.

“A slowing housing market is still likely to be a dominant theme of the first quarter of 2023 as the effects of double-digit inflation, higher mortgage costs and falling real incomes take their toll on buyers’ purchasing power,” said Alice Haine, personal finance analyst at Bestinvest.

“Gone are the days when homeowners could watch the value of their home tick ever higher and higher; now the reverse is true with buyers having the upper hand in sale negotiations.”

However, James Forrester, managing director of estate agent Barrows and Forrester, said: “The housing market continues to stand firm in 2023 and the general economic outlook is far more positive than anticipated.”