Rents for prime property in central London hit a down patch
13-04-2012
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This follows the record breaking increases experienced in 2011 which the firm describes as an exceptional period for the capital's lettings market with quarterly growth well above the long term rate.
It says in its London View Quarter One 2012 report that the market is now entering a period where annual rates begin moving closer to the historic trend, although Cluttons' research also shows that the trend rate of rental growth has increased.
Annual growth over the past five years averages 5.6%, almost twice the long term rate, pointing to the overall improved performance of the rental market. The underlying drivers of the sector would affirm this, with growing globalisation of business in London combined with the declining ratio of owner occupiers to renters, boosting overall rental demand.
‘The remarkable growth in rental values seen last year could not continue and this return to the trend trajectory in values is bringing the market back to a more stable level,’ said Lynn Hilton, partner for residential lettings.
‘While there is considerable economic uncertainty, we don’t anticipate a drastic reduction in rents as demand is still high, but Central London's tenants will undoubtedly welcome increased choice and negotiating power,’ she added.
Meanwhile, a report from Knight Frank reveals that while demand and supply over the past three months are both up on last year, the number of tenancies commenced has fallen by 7%, indicating that potential tenants are looking but are reluctant to commit to making an offer.
New tenant registrations are up 15%, viewings are up 23% and property instructions are up 34% but relatively poor job prospects in the City is having an effect.
Indeed, according to the latest figures from Morgan McKinley's London Employment Monitor, job vacancies across London's financial services sector fell by 8% from February 2012 to March 2012. Compared to the same month last year, this was a decline of 57%.
‘As well as individuals reducing the amount they are willing or able to spend on rent each month, many companies have slashed their corporate relocation budgets. This could explain why the £500 to £1,500 per week band has once again performed better than the £1,500 plus sector. Prices are up 1.5% and down 1.2% respectively over the past year,’ said Knight Frank’s Vicki Shiel.
‘Furthermore, tenants are increasingly choosing to renew existing contracts. The market could however receive a welcome boost over the coming months as London hits the global spotlight and people from around the world choose to spend their summer here. Some international companies have even been enquiring about the availability of entire apartment blocks to short let over the summer,’ she explained.
‘It is also important to note that rents hit an all time high in October 2011, having risen by 26.9% since the middle of 2009. We therefore believe that these recent falls merely represent the market paring back a little, and that rents will have risen over the course of the year, by around 1%,’ she added.
