Why London’s Wealthy Are Renting Instead of Buying - Kanebridge News
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Why London’s Wealthy Are Renting Instead of Buying

By RUTH BLOOMFIELD
Wed, Feb 7, 2024 9:28amGrey Clock 5 min

With London luxury real-estate prices on the slide and a collapse in high-end deal volume, it has been a tough year for prime central London real estate.  But the prime rental market is thriving.   People in need of a London base are increasingly opting to take the flexible, minimal-commitment housing option rather than buying, and paying Britain’s high taxes, in a stalled market. As a result, prime rents are escalating.

House price analyst LonRes found that average prime rents in London increased 3.5% between December 2022 and December 2023. Average prime rents are now 29% above pre pandemic levels notched during the period of 2017 to 2019. Separate research from estate agent Beauchamp Estates found that 63 London homes were rented out for $6,370 or more per week—about $330,000 per year—between January and June 2023.

Buying agent Liam Monaghan, managing director of London Central Portfolio, said many of his prime tenants live a global, itinerant lifestyle. They include soccer players, actors and film producers and tech entrepreneurs.

“They can obviously afford to buy these properties, but perhaps they are on a short-term contract or are growing a business and have got a lot of wealth quite quickly and are jumping between lots of different countries and are still working out where they want to live,” said Monaghan.

Nina McDowall, head of lettings at estate agent Strutt & Parker’s office in Knightsbridge, one of London’s most expensive neighbourhoods, said many of her renters are considering buying a London property but only when they find the perfect home at a great price.

“There are a lot of people who are weighing up their options,” she said. “They might also be sitting tight to see if prices slide further.”

Others, such as Antonio Volpin, simply don’t see London property as a great investment opportunity. Volpin, who is Italian, moved to London for work in 2011, initially living out of hotels. When his wife and two sons joined him in London in 2012, the family started renting.

The Georgian exterior of a rental property in Mayfair that is renting for $37,900 per week. PHOTO: CHESTERTONS

“We mulled the idea of buying a property, because the market was very strong, but I thought it could not grow forever, and with my work I am not sure where I will be next year,” said Volpin, 61, a consultant for asset and fund management firms.

The family’s decision to continue renting proved prescient, because prime central London’s house prices have stagnated for almost a decade. According to LonRes, average sale prices in prime central London increased by just 2.3% between 2013 and 2023 (from $2,130 per square foot to $2,180 per square foot). In 2016, Volpin’s job took him to Singapore, and now he and his university professor wife are based in Rome. Their two sons, aged 26 and 22, opted to remain in London so their parents, who visit regularly, have continued to rent a three-bedroom, three-level, apartment in the affluent, historic neighbourhood of South Kensington, 2 miles west of the city centre.

Antonio Volpin has been renting in central London since 2012 and considers it a more flexible option than buying. PHOTO: OLGA PODPORINA FOR THE WALL STREET JOURNAL

Volpin has signed a nondisclosure agreement prohibiting him from revealing his monthly rental costs, but a spokeswoman for his estate agent, Winkworth, said that a similar property would cost up to $191,000 per year.

“Certainly with that money I could buy, but the point is that at the moment it is more of a kind of holiday home,” Volpin said. “When I come, I want to be close to downtown and to the friends I made while living in London.”

McDowell believes that the reason top-end rental prices have accelerated while home sale prices are falling is simple: Demand for these types of rentals is high and there is a serious undersupply of high-specification, turnkey properties.

“They are as rare as hen’s teeth,” she said. “Super-prime tenants will not sacrifice or compromise on many things. The condition and functionality of the property has to be slick and beautiful, and they will pay big prices, or pay one or two years in advance, to secure the right property.”

But while rents are rising, prime-central London landlords still have to work hard to attract high-paying tenants who expect five-star standards.

“I have had people who want walls to be ripped out or massive extension work,” said Sinead Conlon, head of corporate and relocation services at John D Wood & Co. estate agents. “Some of them want interior-design furniture packages costing about $32,000 to $127,000 per month. They are all looking for an add-on.”

In one memorable case, Conlon was able to rent a substantial house in the north London suburb of Primrose Hill to a tenant who wanted the toilets in the bathrooms, 17 of them, to be replaced with Japanese models with built-in bidets. The tenant, who paid around $70,000 per month to rent the house for a year starting in 2021, eventually settled for just 10 new toilets to be fitted.

“But they are around £25,000 [$32,000] a pop, so it was not exactly cheap,” said Conlon.

Another problem facing landlords is dwindling profit margins. Interest rates have jumped and, since 2020, landlords cannot deduct mortgage interest from their tax bills, said Becky Fatemi, executive partner of Sotheby’s Realty UK. The administration of renting a property is also not cheap. Fatemi said landlords should expect to pay their estate agent between 8% and 15% of the annual rent to find and install a tenant. Management fees, if required, add another 5% to the cost.

Vickram Mirchandani currently owns and rents out two prime London properties. He is painfully aware how hard it is to turn a decent profit even in a hot rental market. Mirchandani, 46, who is British, bought a five-bedroom family home in the upscale neighbourhood of Belgravia, about 10 years ago. They lived in the home full time, but he and his wife became increasingly disillusioned with life in Britain and left London in October, then moved to Dubai with their young family in January—they have one child and are expecting a second.

Vickram Mirchandani & his wife
CREDIT:Vickram Mirchandani

Mirchandani has decided against trying to sell the property until London’s property market has revived. In October 2023, tenants moved into the 4,200-square-foot townhouse, paying just under $8,900 per month in rent.

“It was gone within a week, on the second viewing, for the asking price,” said Mirchandani, a renewable-energy developer. “In hindsight, I could probably have got a little bit more.”

Mirchandani also owns a second property, a three-bedroom penthouse in Belgravia, which he had originally hoped to flip. “The plan was to purchase it, develop it, and sell it at a handsome margin,” he said. “But after Brexit that handsome margin never materialised.”

The apartment is also rented out, fetching $11,500 per month. “I actually got over asking price for that one because the tenant has a dog and I said, ‘Fine, but that will be an extra 10%,’ ” said Mirchandani. “I am very happy with the prices achieved.”

He is less happy with the yields his capital is earning. He estimates that after costs, including income tax, he is earning around 1.5% to 2%. England’s major banks are currently offering interest rates of around 4% to 5%. Longer term, Mirchandani is still weighing his options. “I could keep them in the hope that someday some miracle will happen and they will go up, but if we like it in Dubai we will probably sell the properties,” he said.



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The US housing market remains under pressure as high mortgage rates continue to weigh on affordability and demand. Industry leaders say 2026 has been one of the toughest years for home sales, with slower price growth, weaker mortgage activity, and fewer buyers entering the market. However, experts say reduced competition and more price cuts could create opportunities for well-prepared buyers.

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The typically busy spring season for the housing market was a dud, and the summer isn’t looking much brighter.

Housing services companies like Zillow Group and Rocket RKT +3.78% were loud and clear last week on earnings calls: Rocket CEO Varun Krishna called the quarter through June “one of the toughest spring housing markets in years.”

Jeremy Hofmann, Zillow’s chief financial officer, said on a conference call that the company predicted earlier this year that the market for mortgages would be flat. “We actually now think it’s going to be down low-to-mid-single digits,” he said.

The rest of 2026 will remain challenging for mortgage origination volume, says KBW analyst Bose George. The question now is what happens in 2027. “If mortgage rates remain [around] 6.75%, I think that’s going to be challenging even for next year,” he says.

But what’s bad news for mortgage companies could be a positive for bargain hunters. Buyers can expect prices to grow more slowly—or mildly decline—with less competition as long as mortgage rates remain unpredictable.

Mortgage rates at the beginning of the year were solidly below year-ago levels, notes Zillow senior economist Kara Ng. But they surpassed last year’s levels recently, she adds, referencing Freddie Mac’s weekly survey of 30-year fixed mortgage rates. Last week’s reading, at 6.69%, was higher than year-ago levels for the first time in 2026.

“From the affordability point of view, it’s going to get more challenging in the second half of the year,” she says. “And when affordability gets more challenging, that impacts sales and home price appreciation.”

Mortgage application data tracked by the Mortgage Bankers Association has cooled since the beginning of the year. The trade group expects that the number of mortgage originations in the remaining two quarters will lag behind last year’s levels, after exceeding 2025 levels in the first half.

Rocket’s early-stage data—which the company told Barron’s it derives from its brokerage Redfin, demand for its mortgage products, and signs in its servicing portfolio that a homeowner is preparing to refinance or move—“leads us to expect the third quarter mortgage market to be smaller than the second,” Chief Financial Officer Brian Brown, said on the company’s call. He added that such an occurrence is “something the industry has not seen since 2022.”

Prices will be about flat nationally, Ng says. Zillow’s most recent forecast, which shows how values are expected to change in the year ending June 2027, show them dropping in roughly half of the 100 largest U.S. metros for which data is available.

Buyers aren’t rushing in at a time when mortgage costs are rising and unpredictable. But those with the right combination of patience and cash could stand to benefit. “If you are financially qualified to buy a starter home, you are facing less competition and you’re more likely to get a price cut,” Ng says.