London rent market sees demand up as values fall
Demand in the prime central London lettings market continued to strengthen in September as uncertainty persisted over short term pricing trends in the sales market.
The number of tenancies agreed in the three months to August rose 15.7% and marked the highest on record for the month, according to the latest index from real estate firm Knight Frank.
The data also shows that the number of new prospective tenants and viewings rose 5.5% and 21.7%, respectively and with rent values falling by 4.7% in the year to September tenants should be easier to attract.
However there is a hesitation in the market, and according to Tom Bill, head of London residential research at Knight Frank this primarily relates to the impact of higher rates of stamp duty while the UK’s decision to leave the European Union has amplified a pre-existing mood of uncertainty.
‘Both supply and demand have grown markedly as tenants and landlords await more clarity over the trajectory of the sales market where early leading indicators of demand are strengthening across higher price brackets,’ he said.
He also pointed out that the number of new properties coming onto the market rose 43.8% and the total in August was the second highest on record while April this year was the highest month as a result of changes to stamp duty for buy to let investors.
Bill explained that with rents falling tenants have been able to widen their search areas to more expensive areas of prime central London.
‘Supply and demand are less balanced in some price bands and markets, which means asking rents are being exceeded by some margin in some areas,’ he said, adding that this is the case for lower value properties in some of the best City and Fringe developments.
More broadly, lower price bands have been performing more strongly. Rental value growth below GBP 500 per week is stronger than higher price brackets, though it strengthens upwards of GBP 2,000, which reflected a strong month for super prime tenancies at GBP 5,000 plus per week in September.
A breakdown of the figures show that only two locations in the prime central London market have seen rents rise. Rents were up 1% in City and Fringe year on year and by 1.9% in Kings Cross.
The rest of the sector have seen rents fall, led by an 8.4% fall in Riverside, while rents were down by 8.3 in Chelsea, by 9.9% in Marylebone, by 6.6% in Notting Hill and Belgravia, by 5.9% in Knightsbridge, by 5.5% in Hyde park, by 5.4% in South Kensington, by 3.5% in Islington, by 3.4% in Mayfair, by 3.2% in Kensington, by 3.2% in St Johns Wood and by 0.3% in Tower Bridge.