Lettings volumes in the prime London housing market increased in the first half of 2017 but it was not a uniform pattern across all price brackets, the latest analysis shows.
The number of tenancies agreed across the prime London market in the first six months of 2017 was 7.2% higher than 2016 LonRes data shows, with the biggest growth in demand in the sector below £1,000 per week where the number of tenancies rose 9.8%.
Over the same period, the number of super prime tenancies, that is £5,000 plus per week, increased to 56 from 47, a record for the first half of the year. Below £1,000 per week there has been a continuing acceptance of renting as a tenure model, in particular among younger tenants.
The latest Knight Frank tenant survey shows they are likely to remain the largest group in the private rented sector until 2021. It explains that affordability constraints also curtail some tenants’ plans for a house purchase, resulting in a longer stay in rented properties as they save for a deposit.
According to Tom Bill, head of London residential research at Knight Frank, demand in the super prime lettings market is being driven largely by uncertainty over the short term outlook for price growth, which remains linked to tax changes that include higher rates of stamp duty.
In a sign of this strengthening demand, there were 30 tenancies agreed above £10,000 per week in year to March 2017, which compares to 20 in the previous year.
Bill pointed out that while there was an increase in the highest and lowest price brackets, there was a 6.5% decline between £1,000 and £5,000, highlighting how activity is relatively weaker in the mid-section of the market, where demand has traditionally been driven by senior executives.
‘As a result of political and economic uncertainty caused by issues that include Brexit, financial services companies and banks, which also face a range of regulatory pressures, have made large scale cost savings,’ said Bill.
‘However, despite any uncertainty caused by Brexit, the effect on the pound means renting has become relatively cheaper in London compared to other global financial centres. An American paying $1,000 per week for rental accommodation in 2008 is now paying the equivalent of $613 in London, after rental value declines and currency movements. The equivalent figure in Hong Kong is $792, while it is £848 in Singapore and $1,143 in Shanghai,’ he explained.
He added that demand across the London lettings market remains strong and the Knight Frank data shows the number of new prospective tenants increased 24% in the first half of 2017.
Meanwhile, the number of new rental properties, which grew 28% between the first half of 2015 and 2016, rose by 8% in the first half of 2017 across prime central and prime outer London.
‘Slower growth in supply potentially indicates that some owners have become more attuned to lower pricing in the sales market and are removing stock from the rental market to attempt a sale,’ Bill concluded.
