Annual rental value growth has returned to the prime central London property market due to declining supply levels, according to the latest analysis.
Some landlords have sold or are trying to sell after recent tax changes and this fall in supply has put upwards pressure on rental values, according to Knight Frank’s prime London lettings index.
The figures from the index show that rental values increased by 0.9% in September compared to a decline of 3% in the same month last year.
At the same time the supply of lettings properties has fallen in both prime central and outer London markets as more landlords sell or list their property for sale.
There were 18% fewer listings in the prime central market in the 12 months to August compared to the previous 12 months while on prime outer London there were 13% fewer.
The index report also shows that the percentage of lettings listings in prime central London in relation to sales trended downwards in 2017 and the first half of 2018 as more landlords removed their properties from the lettings market and some were sold.
‘This trend reversed in the middle of 2018, indicating some landlords have re-listed their property to let after their sale price expectations were not met, which would reduce upwards pressure on rents,’ said Tom Bill, head of London residential research at Knight Frank.
‘However, broad upwards pressure on rental values looks set to continue in the short to medium term given the fact that the number of new prospective tenants per new lettings listing has hit a 10 year high,’ he pointed out.
He also pointed out that in a positive sign for demand in the lettings market, the take-up of new office space in central London is higher than it has been in recent years. The 12 month rolling aggregate increased to 14.6 million square feet in the second quarter of 2018, up 15% from 12 months ago.
And that annual wage growth has exceeded the consumer price index since February this year. ‘Together with low interest rates, record low levels of unemployment and a recent boost to GDP, it demonstrates how overall economic conditions in the UK range from benign to positive,’ Bill added.
