Their latest analysis also shows that corporate rental allowance cuts are affecting the market in the £1,000 to £3,000 per week sector.
On the sales side a Knightsbridge flat has achieved a record sales price for the area of £2,900 per square foot and the most sought after properties are commanding huge premiums.
‘There is now no doubt that prime central London rents peaked in September 2011. They levelled off until the beginning of this year, and have since fallen back marginally by approximately 2% but are still higher than at the beginning of 2011,’ said Lucy Morton, senior partner and head of lettings at W A Ellis.
‘Our market is underpinned by the City and the corporate expat community are experiencing job losses and rental allowance cuts. An international oil company has recently cut their budgets and in some cases this is as much as 50%. The worst affected area is in the middle management sector, thus increasing stock levels and having a bearing on rents between £1,000 and £3,000 per week,’ she added.
The research shows that the strongest demand is the market below £1,000 per week. ‘We are all waiting to see whether the usual influx of expat families will be coming to London during the summer to settle before the school year begins. The budgets for these families over the last couple of years have tended to start at £3,000 per week, rising to as much as £30,000 per week,’ said Morton.
‘Tenants are aware of the change in market conditions and some are looking for cheaper properties with more space. There will no doubt be movement from tenants relocating within London. UK tenant demand continues to rise, and interestingly, there are now more Europeans arriving to rent in London than there are Americans,’ she explained.
‘The increase in supply and the worry over voids may force some landlords to sell but then they have the dilemma of what to do with their money and how to keep it safe, as well as the from the burden of any capital gains tax. We have noticed some stock moving to the sales market over the last couple of months and the trend of clients placing properties on both the sales and lettings markets continues,’ she added.
Richard Barber, partner in residential sales at W A Ellis, revealed that the firm is noticing more stock coming to the market and agents are vying for instructions often with the promise of achieving a special price for the prospective client.
‘We have recently exchanged contracts on a flat in Pont Street, Knightsbridge, where we achieved £2,900 per square foot which we believe to be a record for the location. The purchaser and their advisers could see the rarity value of the flat, as it was situated on the first floor, had excellent volume and comprised approximately 2,315 square feet principally arranged over one floor,’ he said.
‘We have been advocating for many years lateral space, and within prime central London, it is now commanding huge premiums and will continue to do so due to its scarcity factor. Prime central London and Knightsbridge in particular, is dominated by foreign investment and these purchasers are prepared to pay high figures especially for first and second floor lateral flats with three or four bedrooms comprising well proportioned accommodation,’ he explained.
He also pointed that due in part to the Listed nature of much of prime central London, it has been historically difficult to create lateral space across two buildings and, as a consequence, apartments of this nature are rare and can command high premiums of circa £3,500 per square foot.
‘Houses arranged over only two or three floors with good volume and breadth are also rare and a low built house can also command a high figure, particularly if coupled with garaging and a garden. We are currently marketing a modern house in Passmore Street, priced at £3.5million, which fulfils the above criteria and it is already attracting strong interest,’ he added.
