New housing data from Knight Frank indicates that the London prime rental market is beginning to recover with a decline of 0.1% for the year ending in May.The middle price sector has had a 1% increase as a result of demand for the lettings market.
Tom Bill, head of London residential research says the economic and political uncertainty continues to impact the prime lettings market with a forecast of rents increasing by 0.5% for 2018.
The number of property listings for rent in the past year to April declined by 15% as more landlords planning to sell as a result of tax changes for mortgage interest relief and wear and tear allowances.
Tenancies with rental rates of £5000 or more a week rose 24% in the year to April while rents at £1,000 a week and below saw an increase of 12%.
Outside of London the prime market saw tenancies above £1000 per week increase by 28% for the year ending in April and an increase 0f 19% for the £1000 and below tenancy rates.
The report says that corporate tenants have become more price sensitive and find better rental rates and value outside London.
Listings declined 13% in the year to April than than in 2017 with annual rents declining by 2.7% as of May this year. The May numbers were the strongest since July 2016
Tom Bill of Knight Frank:
‘Despite data from Lloyds Bank showing that confidence in the UK economy ticked up in May, uncertainty surrounding post-Brexit trading arrangements and the timing of the next interest rate rise have contributed to sterling weakening against the dollar in recent weeks, reversing gains made this year.’
‘Strong equity markets, low interest rates and generally robust global economic growth have combined to increase IPO activity on global stock markets over the last 12 months. Financial services remains a key driver of activity in prime sales and lettings markets in London.’
Landlord News reports that areas of London and in particular Chelsea continue to see increased demand of 25% for prospective tenants for the year to April 2018. Viewings for properties in Chelsea have increased by 5%.
Arya Salari, Head of Lettings at Knight Frank’s for Chelsea:
“Strong demand for Chelsea houses among tenants is the result of lingering caution in the sales market around higher rates of stamp duty.”
“However, at some point this dynamic will reverse and it is increasingly common for tenants above £3,000 per week to insert a clause in the tenancy agreement that gives them first right of refusal to buy at the end of the contract.”
In its analysis of the rental sector Knight Frank reports that the insurer AXA found in its analysis that almost half of the landlords in the UK planned to be out of the private lettings market by 2020.
Additional research by the English Housing Survey shows that private rented sector accounts for 30% of all tenancy for London with other locations including Kensington & Chelsea and Westminster accounting for 50% of all tenancies according to Knight Frank.
In previous data by Rightmove the lettings property market accounted for 71% of the sales and rentals combined in July 2017. However, by February 2018 the number decreased to 62%.
Knight Frank states:
‘Meanwhile, tenant demand continues to grow, suggesting continued upwards pressure on rents. The number of new prospective tenants that registered in the year to February was 16% higher than the previous 12-month period.’
Meanwhile, the number of viewings rose 14% over the same period.
In their assessment of the prime residential lettings sector Savills reports:
‘By 2019, we anticipate confidence to return to the prime residential markets, once we have a better idea of how our exit from the EU will unfold. This would usually translate into the stabilising of rental values, but as the number of new build completions is expected to be at its highest in 2019, this will limit any significant rental growth. We are forecasting that capital value growth will exceed rental growth over the next five years so landlords are advised to take a longer-term view regarding the value of their assets.’