Average rents in the prime central London residential property market were unchanged for the second consecutive month in August, the latest index report.
The latest monthly data contributed to an annual fall in average rental values of 3.4% in August, which was the slowest decline in more than 12 months, according to the index report from real estate firm Knight Frank.
A decline of 1% in the six months to August was also the lowest fall on this basis since December 2015 and Tom Bill, head of London residential research at Knight Frank, pointed out that the figures provide further evidence that a recent run of declines in the lettings market is bottoming out.
‘The fall in rental values in prime central London over the past two years has primarily been due to high levels of stock, which means that landlords have had to reduce rents in order to attract tenants,’ he said.
‘Higher levels of rental properties are the result of slower activity in the sales market following a succession of tax hikes, however this trend has started to reverse as asking prices adjust and demand improves,’ he added.
He also pointed out that curbs on mortgage tax relief and a 3% stamp duty surcharge also appear to have contributed to the market tipping back in favour of landlords as less new rental stock comes onto the market.
Some 45% of landlords in central London have reviewed their portfolio size, according to analysis carried out by research company BDRC Continental in August. Across the whole country, 19% of landlords with 20 or more rental properties have reduced the size of their portfolio, the research found.
The findings tally with Knight Frank data, which shows there was a 6% decline in the number of new rental properties coming onto the market in prime central London between January and July 2017 compared to the same period a year earlier. In a sign the trend is accelerating, the like for like drop was 13% between May and July.
This comes against the background of UK Finance revising down its forecast for buy to let lending in 2018 by 13% to £33 billion from £38 billion and Bill explained that while supply has begun to tighten, demand indicators have continued to strengthen, which will support rental values.
The number of tenancies agreed in the first seven months of the year was 21% higher than 2016 and 59% above the level in the same period in 2015. Meanwhile, the number of new prospective tenants registering with Knight Frank between January and July this year rose 13% and the number of viewings was up by 23% compared to last year.
