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Rental values down year-on-year in Prime Central London
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Prime central London rental values have slipped by 3.6% year-on-year to July, but activity in actually greater than last summer, according to latest figures.
A new report from international real estate firm Knight Frank shows that values were down due to increased stock levels and uncertainty surrounding Brexit.
Ups and downs
The number of tenancies agreed in the second quarter of the year actually increased by 3% in comparison to 2015. Viewings were also up by 15.8%.
However, the number of prospective new tenants fell by 6.8% in the same period, while rental yields remained flat at 3.1%.
Tom Bill, head of London residential research at Knight Frank, said that the Brexit vote had served to reinforce existing pricing trends.
Bill noted, ‘demand has been relatively flat since the start of the year due to uncertainty surrounding the state of the global economy, particularly in the financial services sector, which contributed towards a slowdown in rental value growth from its last peak of 4.2% in May 2015.’[1]
‘This trend has been compounded by higher levels of supply as stock has moved across from the sales market, with more vendors becoming landlords due to weaker conditions in the prime sales markets,’ he continued.[1]
Rental values down year-on-year in Prime Central London
Selective
Mr Bill observed that, ‘in the three months to the end of June this year, the number of new rental properties placed on the market rose by 49%, compared to the same period last year. As a result, landlords are reducing asking rents to prevent void periods and tenants are becoming more selective.’[1]
Properties where asking rents are seen as too high are struggling to receive viewings. Bill believes that the result of the referendum has highlighted this dynamic. Landlords are now taking a pragmatic approach to rents, with a background of rental uncertainty and increasing stock levels. Rental volumes are expected to increase into the Autumn.
‘The uncertainty ahead of the Brexit vote could be an explanatory factor for weaker registrations, although early signs are positive with no significant announcements that companies are pulling back from relocating staff to London following the referendum,’ Bill explained.[1]
Budgets
The investigation also found that relocation budgets have risen due to the effects of the falling Sterling price. This means tenants are searching in higher-value regions.
Indeed, the number of would-be tenants registering with Knight Frank with a budget of £1,500 per week rose by 11% in the three months to the 24th July, in comparison to 2015.
Bill concluded by saying, ‘combined with the fact that rental values have been declining, it means tenants are widening their searches to higher value areas. For example, senior executives are increasingly able to rent in areas like Mayfair while some young professionals are looking in areas like Kensington rather than east London.’[1]
[1] http://www.propertywire.com/news/europe/prime-central-london-rents-2016080512232.html
