Demand increases for prime London rental property

Demand is increasing for prime London rental property, as the market’s decline in rents bottoms out.

The annual rate of growth eased to -4.9 per cent and the quarterly rate of decline was -0.7 per cent, which was the lowest level since November 2015, according to Knight Frank’s latest Prime Central London Rental Index.

The amount of lettings property coming onto the market in prime central London has risen over the last 12 months, as uncertainty grew over pricing in the sales market following a succession of tax hikes. This was compounded by political uncertainty surrounding the EU referendum.

While the annual increase in new lettings properties on the market was 51 per cent last June, this figure had eased to 23 per cent in February.

In a sign that demand is increasing, the number of new prospective tenants registering rose 1.5 per cent year-on-year in the six months to February. Meanwhile, the number of tenancies agreed increased by 22 per cent over the same period.

Demand varies at different price points, though, with below £1000 per week particularly popular, due to students, a greater acceptance of renting as a tenure model by young professionals and the fact some corporate accommodation budgets have been cut, increasing demand in lower price brackets. Demand is slower between £3,000 and £5,000 per week, which has traditionally been driven by senior executives in financial services.

“Landlords at this price point frequently have to make double-digit percentage reductions to asking rents to prevent void periods,” says Knight Frank.