The final three months of 2016 saw a strong growth in lettings volumes in the Prime Central London market. Activity was particularly strong at the highest and lowest end of the sector, according to the latest index from Knight Frank.
Data from the report indicates that the decline in annual rental value growth slowed marginally, down by 5% in January. In addition, there was a 5% year-on-year increase in the number of super-prime deals during 2016.
Supply
There was a 12% rise year-on-year in the supply of new listings during the final quarter of last year. However, this was lower than the 30% increase seen in the first nine months.
The largest falls in rents in the year to January 2017 were in Knightsbridge (-9.9%), followed by Notting Hill (-9.5%), Riverside (-9.3%) and South Kensington (-9%).
There were also substantial falls in Chelsea (-5.3%), Belgravia (-5.15%) and Mayfair (-3.8%).
However, other regions in Prime Central London are fairing better. City and Fringe, King’s Cross and Tower Bridge saw small year-on-year declines of 0.7%, 0.6% and 0.2% respectively.
Stronger
Tom Bill, head of London residential research at Knight Frank, observed that the annual rental value decline of 5% seen in January was marginally stronger than that seen in the two months previously.
‘Rental values have been declining since May 2015 in part due to higher levels of rental stock. The fact landlords face a less favourable tax environment from April, has contributed to the slowdown in supply to some degree,’ Bill added.[1]
He also noted that demand continues to improve in the higher and lower end of the Prime Central London market. Particularly, the above £5,000 per week market, or the super prime, is seeing sustained demand.
PCL lettings see strong end to 2016
The number of new tenancies agreed in Prime Central London was 20% greater in the final quarter of 2016 in comparison to 2015. Bill believes this will put upward pressure on rental values.
‘For rental properties between £1,500 and £5,000 per week, activity is improving but remains comparatively slower. The primary cause is that budgets for senior executives at financial institutions have been reduced due to the wider mood of economic uncertainty. While the UK’s decision to leave the European Union has raised some questions over the status of London as a leading global financial centre, this trend for greater efficiency pre-dates Brexit and relates to the increased regulatory pressures on banks as well as a low interest rate environment that curbs profitability,’ Bill concluded.[1]
[1] http://www.propertywire.com/news/uk/lettings-volumes-prime-central-london-saw-improvement-end-2016/