The ultra prime market where rents are £100,000 plus per annum and the super prime sector with rents of £1 million and over are currently booming, according to lettings specialist Beauchamp Estates.
Its latest report in conjunction with market intelligence group Dataloft, looks at the top 5% of properties let in prime central London over the past five years in terms of rental price achieved.
In order to live in luxury in one of the capital’s top 5% of lettings properties, a tenant now has to pay a minimum rent of £108,000 per annum or £9,000 per month, which is the highest entry level for this sector of the London lettings market ever recorded.
In addition, there has been a 12.8% rise in the number of properties let at rental values of over £10,000 per week compared to the same period in 2013.
The average weekly rent in London’s ultra prime lettings market is now £3,500 per week or £182,000 per annum, a 23% rise since 2009 when the equivalent average figure stood at £2,813 per week or £135,025 per annum.
Outside of the capital, a household could purchase a property for this annual rent, since the latest Land Registry records show that the average price of a home in England and Wales is now £177,299.
Over the last 12 months ultra prime rental levels have continued to rise. Across prime central London the average rent paid in the third quarter of 2014 was 6.5% higher than 12 months earlier, the highest rate of growth for more than three years.
The research reveals that the super prime lettings market, properties to let for over £1million per annum, is also extremely buoyant. The findings show that the £1 million plus rentals market first emerged back in 2010.
Initially, the £1 million plus super prime rentals market was confined to Mayfair and Knightsbridge, however during 2013 and 2014 the market has expanded significantly and Chelsea, South Kensington, Notting Hill, Regent’s Park, St John’s Wood and Holland Park have all seen properties let at rents equivalent to over £1 million per annum.
The firm points out that the ultra prime lettings sector is highly lucrative and therefore, despite its small percentage size, in terms of rental income it is disproportionally large and is extremely important to the overall health of the capital’s lettings industry.
The annual rent roll from ultra prime London rentals agreed in the first nine months of 2014 is equivalent to £102 million in annual rental income. This represents 21% of the total annual rental income of all lets agreed so far this year across prime central London. In other words, a twentieth of the deals make up a fifth of the income produced by the sector.
The report reveals that the ultra prime rental market is evenly split between flats at 51% and houses at 49%. The houses tend to be let by ultra wealthy continental Africans, Middle East tenants and Russians/CIS, who have made their wealth from oil, gas, investments or commodity trading.
Beauchamp Estates has found that in the last two years wealthy Africans, especially Nigerians, have become a driving force in the luxury residential market, replacing Russians and Ukrainians whose numbers have declined. These tenant groups often have large extended families and therefore need the space or prefer to live in houses.
The luxury apartments and penthouses tend to be let by UK, North American, Continental European and Asian households. Predominantly these tenants work in banking, financial services or advertising/marketing and are on secondment to London for a couple of years.
The report reveals that Mayfair is London’s top lettings address and has also witnessed the greatest rise in ultra prime rentals. In 2009, Mayfair had only 5% of ultra prime market lets, but by the middle of 2014 its share had risen to 13% and with Mayfair’s pipeline of new developments is forecast to rise to 15% over the next three years.
In the year to date, the other top lettings addresses are Chelsea and South Kensington, each accounting for 13% of high value lets. The other key luxury lettings locations are Knightsbridge, Belgravia, St John’s Wood, Regent’s Park, Notting Hill and Holland Park.
The research reviewed London lettings in the top 5% of the market and has devised a profile of the properties inhabited by super affluent tenants. For ultra prime houses, the typical letting is a 12,000 square foot to 16,000 square foot mansion or ambassadorial house on a one to three year tenancy. Must have features include a private cinema, wine cave, private gymnasium with swimming pool, lifts, ample parking facilities and substantial landscaped gardens.
For ultra prime apartments, the typical letting is a 5,000 square foot penthouse with concierge and five star hotel style facilities, private gymnasium, state of the art entertainment, lighting and comfort cooling systems and large rooftop gardens with panoramic views over London.
‘Over the last 12 months rental values in London’s ultra prime sector have risen after a period of stability. Rental demand is linked with the health of the capital’s economy and as this has excelled, rental values have been driven upwards,’ said Karolina Fiszbak, lettings manager at Beauchamp Estates.
‘As demand has increased supply has been diminishing. In the third quarter 2014, there were 10% fewer rental properties made available to let across prime central London compared with the same period in 2013,’ she added.
Gary Hersham, managing director of Beauchamp Estates, revealed that last week on the day of the Stamp Duty changes, prior to the midnight deadline, Beauchamp Estates fast tracked sales deals worth £100 million for clients.
‘The Stamp Duty changes will be most marked in the top 5% of the UK housing market. The UK's multi million pound housing market is largely concentrated in prime central London and wealth pockets in the Home Counties, this is where the Stamp Duty changes will be felt most strongly,’ he explained.
