Locals face battle with investors as Hackney rental costs continue to soar
The cost of renting a property in Hackney soared by more than 25% in 2011 according to Findaproperty.com. The figures run from June 2010 to June 2011 and use the rental asking price of properties advertised on its website.
This surge could lead to a shift from home ownership to private tenants in some areas of Hackney.
Samantha Baden, an analyst at Findaproperty.com and a recent home-buyer in Dalston, said: “Anecdotally we hear that there’s a large increase in the number of buy-to-let investors in Dalston due to the rising number of young professionals moving into the area.”
This puts home buyers head-to-head with investors who tend to have more resources at their disposal and can pay higher prices for properties if higher rents will cover the cost.
At the same time many of Hackney’s existing home owners sit on fat profits after years of property price rises. They too increasingly see their properties as investments.
Baden said the home-versus-investment debate over properties was “different for everyone” and outlined her attitude to the property she has bought in Dalston: “It’s a very small one-bedroom flat and while I love it now and consider it home, I did buy it with one eye on the future. I feel confident that my flat will be a solid buy-to-let investment when I decide to move up the property ladder.”
The question is whether Findaproperty.com’s figure means there is a rent bubble or if we should expect a long-term rise in rents?
Last year Jules Pipe, Mayor of Hackney, said he thought that high property prices would dissuade investors: “The impact of rising property prices in Hackney (means) the market has become very expensive for first-time buyers. This would suggest that the driving factor for today’s incomers is the desire to live in the borough, rather than seeking investment opportunities.”
But investors are now likely to find the borough more attractive. Even the threat of financial disaster in the eurozone has not dented buy-to-let landlord optimism. In August a survey by the National Landlords Association found that confidence in the rental market was at four-year high, despite the majority having a negative view of the economy.
Closer to home, the borough’s rising rents makes house prices more acceptable to buy-to-let landlords. In addition there is room for further rises. The average rent paid for a property in Hackney (£1,930) remains below the London average (£1,979 per month) with many parts remaining cheap despite increasing popularity.
FindaProperty.com said the average rent in Dalston was £1,580 and £1,427 in Stoke Newington. In Clapton its even less at £1,373. But last month Remy Zentar, owner of the L’Epicerie deli in Chatsworth Road, Clapton, told the Citizen: “I employ 15 people, all of whom live locally, and for them rent rises are a big problem.” He pinned the blame on buy-to-let investors.
But whatever is driving the rents, businesses like Zentar’s will eventually bear the brunt, according to Andrew Jones, director of the Local Economic Policy Unit at South Bank University. He said that employers will have to compensate employees, either for travel or for rent: “If people are being forced out then eventually that’s going to impact on employers wages – they will have to pay more.”
But Jones, who co-authored a report on an eight-year-long £124 million regeneration programme in Hackney, said his main concern was “the impact on people claiming housing allowance”.
He said that government policy on social housing had shifted and it was now seen as ‘an emergency safety net’ for residents. Those outside it are at the mercy of market forces and already face government-imposed caps on housing benefits that could, according to Jones, “drive poor people out of the borough”.
However, Hackney Council said that while 169 families in the borough face an average £145 per week shortfall on their rents due to the new £400 cap, the situation may not be as gloomy as commentators like Jones expect.
A spokeswoman pointed to the effects of a £550 cap imposed on housing allowance in 2009 which threatened 32 families in Hackney, some by as much as £300 per week. The council said it “received no enquiries from these families and none were evicted or re-housed. It appears that the landlords of these properties reduced the rents accordingly.”
So the most pressure will be on low earners who don’t own properties and who fall outside the housing benefits safety net. Many of these will be people who work in local businesses as well as artists.
Glad the Citizen is covering this issue. The question are rents up on existing properties, or are new builds commanding higher rents pushing up the average. I think sadly the former is true. The council and the GLA need a plan for housing. We need about 50,000 new builds a year for the next few years, currently we are on about 20,000.
Surprise, surprise – a quote from Comrade Pipe which demonstrates just how out of touch he is, yet again!
Is the inner clique of Hackney Council genuinely concerned with the housing needs of all Hackney residents, or are its members only interested in attracting private developers and protecting house prices in the borough?
It’s pointless blaming investors, or Jules Pipe (despite his misguided comment). The root problem is a chronic and dire housing shortage. IPPR predicts a shortfall of 325,000 homes in London by 2025. London needs to build housing in huge quantities to tackle this shortfall, and that means constructing taller buildings which accomodate greater densities. For too long London planners have been imposing policies more suited to a provincial heritage town than a world capital with an existential housing shortage. If things don’t change we’re going to see an exodus from London.
@Benjamin: Fair point about the housing shortage. And we’ve already seen an exodus of first-time buyers and families on modest incomes from London over the last decade.
That said, protecting the long-term interests of Hackney residents is part of the job of local politicians, some of whom seem to be quite flaky or even ambivalent about doing do.
@GSOB: surely the long-term interests of residents is that London remains a competitive world city which provides enough housing that enables people from a wide variety of socio-economic backgrounds to live and work here?
My worry is that local politicians and planners are looking after the shorter-term financial interests of home-owners in ensuring their property prices continue to go up by refusing to tackle the shortage.
Benjamin refers to a “world capital with an existential housing shortage”. Really? An EXISTENTIAL housing shortage?
Would this be a housing shortage where the individual has the sole responsibility for the conditions they live in, whether it be homelessness, overcrowding or a palatial pad?
Yes, I’m sure Søren Kierkegaard would have considered that London’s planners – and advocates of modern tower blocks – should be free to walk away angst-free.
@chewbacker I mean that the housing shortage – and its consequent high prices – could threaten London’s existence as a leading world capital.
You mean existentialISM.
@Benjamin: sadly, the phrase “London remains a competitive world city” (and variations thereupon) has been co-opted by politicians who don’t have the interests of the vast majority of Londoners at heart, but are happy to use it as an excuse to make savage cuts or to foist white elephant projects on taxpayers.
“My worry is that local politicians and planners are looking after the shorter-term financial interests of home-owners in ensuring their property prices continue to go up by refusing to tackle the shortage. ”
Mine too, though I suspect that we’d differ on the details.
@GSOB: Just about every phrase ever uttered has been abused by politicians, but that shouldn’t make the words themselves redundant.
Bet that Hackney Council (or rather, certain councillors) are rubbing their hands together with glee at the prospect of more high-end retail brands in Shoreditch:
http://www.eastlondonlines.co.uk/2011/10/shoreditch-to-become-a-mini-bond-street/