A recent report shows that rents in some areas of London rose in February, for the first time in three years. According to upmarket, international estate agency Knight Frank, an increase in demand for rental homes in parts of greater and outer London helped push some rents a little higher in February 2019, compared with a year earlier.
To be sure, the rise was small – just 0.2%. Nevertheless, it highlights that the combination of tax increases and rule changes have worked to lower the number of landlords and properties available for rent in and around the capital. At the same time, despite the ongoing uncertainty of Brexit, demand from tenants in London has grown.
Rents rise as demand accelerates
Knight Frank’s Prime Central London rents survey for February, shows that rents were higher than a year earlier in the lower end of the market. Properties costing between £250-500 per week, £500-750 and £750-1,000 per week all rose between 0.5% and 0.1%.
The figures also show that while average rents for flats were 0.1% higher than a year earlier, rents for a house were 0.4% lower, over the same period.
“Annual rental value growth turned positive in prime outer London for the first time in three years in February,” Knight Frank wrote in its monthly Prime Central London lettings report. “The tax changes introduced for landlords in recent years have put downwards pressure on supply levels across prime markets in London.”
The estate agency adds that the ratio of prospective tenants versus new supply in prime outer London, rose to 5.4, largely reflecting a seasonal rise in new tenants searching for a rental home.
That increase in rents across some outer London regions comes as a measure of UK-wide rents also showed a rise. According to data from ARLA, 26% of private sector landlords raised their rents in January.
While that’s likely more reflective of a broader landlord response to the tax and other changes imposed on the sector in recent years, it highlights that after some time, the downward pressure on rents is reversing.
London sale prices remain negative
While some London areas experienced an increase in rents during February, sales prices across the capital remain in the doldrums. Knight Frank’s separate Prime Central London Sales report shows that the average sale price of a home in both central and outer London, fell by 4.8% on the year in February.
The report also shows that average sales prices fell by 1.4% on the quarter and by 0.4% on the month. Again, the figures were the same across both areas of London.
Despite the continued decline in property sale prices, which the well-known estate agency links to Brexit-related uncertainty, there is hope of a future reverse to those sale price declines.
“The number of prospective buyers registered in London continues to climb while the number of exchanges has declined due to uncertainty surrounding Brexit negotiations,” Knight Frank wrote in its PCL sales report for February. “This growing pent-up demand suggests activity levels will increase as political clarity returns.”
That view is supported by a rise in the ratio of new prospective buyers versus new supply, to an all-time high of 9.1, compared with a ratio of 5.9 a year earlier.
Right now, however, it appears there’s little cheer for sellers of residential London property and that in order to secure a sale, acceptance of a lower price is a must.