Rent growth largely flat in prime property market in London

Rental value growth in prime central London has been broadly flat over the last 12 months, underpinned by the fact demand has grown faster than supply, the latest sector report says.

However, as average sale prices have declined over the same period, this has led to a rise in yields, according to the August prime London lettings index from Knight Frank.

The data shows that in prime central London rents fell by just 0.2% and on a quarterly basis they increased by 0.5%, while in prime outer London rents were flat year on year and quarter on quarter they increased by 0.2%

It also shows that the number of new prospective tenants increased by 22% in the year to July 2019 in prime central and prime outer London, led by increases in north London and in the city fringe for homes up to £1,000 per week.

The number of super-prime tenancies agreed in second quarter of the year was 40, the highest figure for the second quarter in more than five year, which has been underpinned by the uncertainty in the sales market.

Annual rental value growth in August was positive in lower value markets across prime London. Tom Bill, head of London residential research at Knight Frank, said that this was due to the fact that new supply has tightened to a greater degree in lower price brackets.

‘Vendors in higher price brackets are typically more discretionary and some have opted to let rather than sell until price inflation returns,’ Bill added.

The report also points out that the number of construction starts in London dropped to its lowest level in seven years in the second quarter of 2019, underlining how the supply of housing is likely to remain a key issue in the capital.