London Landlords Dump Holiday Lets on Residential Market, Pushing Down Rents

(Bloomberg) --

Short-term rental properties offered on websites like Airbnb Inc. are being dumped on London’s normal letting market as the coronavirus outbreak shuts out tourists, pushing down the capital’s rents.

Most inner London areas saw an increase in the number of properties with asking-price cuts of more than 10% in the two weeks from March 9 compared with a year earlier, according to property website Zoopla. The amount of cuts was more pronounced in the richest boroughs, with 5.4% of Kensington and Chelsea rentals seeing such declines and a similar proportion in Westminster.

The pressure on rents is likely due to owners of apartments and houses on platforms like Airbnb switching to the traditional -- and cheaper -- letting market as the virus chokes off tourism. There was a 45% year-on-year rise in new rental listings for central London in the week starting March 16, with similar trends seen in other popular destinations including Brighton and Edinburgh, according to data from Rightmove Plc, another property website.

The rapid decline in demand for holiday lets is just one example of how the deadly Covid-19 virus is roiling the U.K. real estate sector. The outbreak has left banks, brokers and landlords struggling to react, with the government taking the unprecedented step on Friday of demanding a virtual freeze of housing transactions.

San Francisco-based Airbnb has seen its bookings collapse by 40% in big European cities and China amid the pandemic, the Financial Times reported earlier this month, citing data from analytics group Airdna.

“Today, there are as many listings available on the Airbnb platform for prospective guests as there were prior to the pandemic,” a company spokesperson said in a statement. “Both Airbnb’s own data and data from third-party real estate websites do not bear out the one-off anecdotes cited.”

Investors who became accustomed to higher rents for short-term lets now face a dilemma. They can keep their properties empty until tourist demand recovers, or offer longer lets to prospective tenants, locking in a lower yield for months to come. With the length of the outbreak still uncertain, neither is an obvious choice.

“Some markets where short-term rentals have been a big factor, we could possibly see some financial stress there” as a result of the pandemic, said Neal Hudson, a residential property analyst who wrote a report on housing markets last year for the Local Government Association. Landlords no longer being able to pay their mortgage “could contribute to excess selling in the market, pushing prices down.”

©2020 Bloomberg L.P.