• Q1 Prime London residential rents increased by 9.7% compared with the same period in 2011
• Prime central London yields nudged downwards to 3.7%
• Rental growth of 2-4% is forecasted for Prime London in 2012
• Knightsbridge, Belgravia, Chelsea, South Kensington and Canary Wharf all experienced rental falls
The prime London residential lettings market has overall experienced a healthy start to the year; however there are signs that as a result of decreasing demand and increasing supply the market is undergoing a period of correction.
Despite the average residential increases of 9.7% experienced by Chesterton Humberts in Q1, a number of prime locations including Knightsbridge, Belgravia, Chelsea, South Kensington and Canary Wharf recorded rental falls. As corporate tenants still account for the main slice of demand in prime locations, the impact of job losses in the financial services industry and reduced corporate budgets has exerted downward pressure on rents.
Prime gross yields, as at March 2012, nudged downwards to 3.7%, as the slight drop in rents was accompanied by a stronger upwards movement in capital values.
As sales prices continue to increase and it gets harder to secure finance, in-betweeners (ie: people who are waiting to buy) are the fastest growing tenant group. As the private rental sector (PRS) benefits from an injection of capital and professional management this could bring about a long term change in attitude towards renting, to renting for choice rather than necessity.
Robert Bartlett, Chesterton Humberts’ CEO, comments: “The prime London residential lettings market is facing a variety of challenges this year and in spite of the ongoing economic gloom, overall rents are continuing to increase. Good quality rental properties are being let at record prices and in record time, however properties which don’t meet all of the criteria are suffering.
“Stock availability is no longer an issue in the prime locations and there is evidence of localised oversupply of stock available on short lets as a result of some landlords wanting to cash in on inflated rents during the Olympics. We have yet to see how this will impact on the rental market post-Olympics as many tenants have opted to delay moving until after the games when rent negotiations should settle back into a more normal pattern."
“However, the longer term outlook for this important sector remains good and we will undoubtedly see more and more emphasis on the importance of the private rented sector in meeting UK housing needs.”
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