Rents for London’s best residential properties rose 0.2% in January, which was the highest monthly increase since September 2011, says the report from Knight Frank.
Rents fell 2% versus January 2013, which was the lowest annual decline since August 2012, and the firm expects annual growth to return by the end of this year.
‘More senior executives from industries like banking, insurance, shipping and mining are searching for rented property than last year and relocation agents are increasingly prevalent in the central London lettings market as more employees move to the capital from overseas. This trend helped to push the total number of lettings higher by 19% in the 12 months to January,’ said Tom Bill, Knight Frank residential research associate.
‘While there are some generous relocation packages for the most senior people, the purse strings are still tighter than they were before the crash for most staff. This has caused many to seek better value beyond traditional markets like Mayfair and Chelsea and look in areas like Marylebone and Hyde Park Estate,’ he explained.
‘Meanwhile, the UK passed more economic milestones in January, including the announcement that its economy grew by 1.9% in 2013, the fastest rate since the financial crisis. Furthermore, permanent job vacancies in London grew by the fastest rate since January 2001, according to the December Markit Economics Report on Jobs,’ he added.
The report also shows that prime central London rental yields fell in January to 2.86%, the result of falling rents and strong investor demand. The full extent of this demand was demonstrated in December, when yields fell to 2.88%, dropping below the benchmark 10 year UK government bond yield of 3.02% recorded at the end of the month.
‘UK government bond yields have risen as the US Federal Reserve winds down its stimulus programme but it meant, at least on paper, prime central London property ended 2013 as a safer bet than UK government debt,’ Bill pointed out.
‘It followed a 32 month period when rental yields were higher than the so called risk free rate though investors typically buy prime central London property in the hope of capital growth, rather than just for rental income,’ he added.
