Annual rental growth has turned positive in prime central London for the first time since January 2016, the latest index data shows.
Rents were up by 0.8% in the 12 months to May 2018 in the prime central market but are still down by 1.7% on a quarterly basis while in the prime outer London market rents are 2.09% below May 2017 but up 1.27% on a quarterly basis.
On an annual basis rents are rising across all sectors so far in 2018, up 2.8% in the £250 to £500 per week sector in central London, up 1% in the £500 to £750 bracket, up 1% in the £750 to £1,000 and the £1,000 to £1,500 sector, up 2.1% in the £1,500 to £2,000 per week bracket and up 2% in the £2,000 plus rental sector.
In prime outer London rents are up 0.6% year to date in the £250 to £500 a week sector year to date, up 0.8% in the £500 to £750 bracket, up £0.1% in the £750 to £1,000 sector, up 0.9% in the £1,000 to £1,500 sector, up 0.8% in the £1,500 to £2,000 sector but down 0.5% in the £2,000 per week and above market.
The index report from real estate firm Knight Frank explains that rental values have strengthened as supply levels have fallen, which has happened as more landlords have listed their properties for sale following recent tax changes in the lettings sector and as sales pricing appears to bottom out.
‘As supply has declined, the relative strength of demand has also risen. The ratio between the number of new prospective tenants and the number of new lettings listings rose to 4.6 in May, which was the highest figure in more than 10 years,’ said Tom Bill, head of London residential research at Knight Frank.
The research also shows that the proportion of landlords who are registering as new prospective buyers has fallen over the last four years in prime central and outer London. Following a series of recent tax changes, they accounted for 13% of new prospective buyers in May 2018 compared to 20% in May 2014.
The number of properties listed for rent in prime outer London in the year to May 2018 was 14% lower than the previous 12 month period. ‘More property owners are trying to sell their property following tax changes that have affected landlords, which is putting upwards pressure on rental values,’ Bill explained.
He pointed out that a quarter of respondents to a Bank of England survey said they had ‘no idea’ as to the likely direction of interest rates over the following 12 months, the highest figure since the survey began in 1999. ‘Mixed economic data had increased uncertainty but most economists expect a rise this year,’ he added.
