Rents fell by 0.8% in prime central London in July, taking the annual decline to -1.1%, reports Knight Frank in the latest Prime Central London Rental Index for July 2012.
Liam Bailey, Head of Residential Research at Knight Frank, says that weak performance in headline rents is disguising notable improvements in lettings volumes:
“We have noted how rents have been edging down in prime central London (PCL) since October last year. The rate of this decline has been fairly sedate, and while July’s 0.8% fall marks the biggest decline since monthly records began in April 2011, rents in PCL are still 25% higher than the trough of the market in the second quarter of 2009.
There is no doubt that the prime rental market has been affected by the downturn in financial sector employment caused by the slowing UK economy and the Eurozone crisis over the last year. Recent figures from the Centre for
Economics and Business Research (CEBR) suggested that the number of finance jobs in the City of London had fallen to 255,000 this year, down from 354,000 in 2007.
Despite this unsettled background, July saw a noticeable upturn in the lettings market in terms of volume, with 30% more tenancies agreed compared to the same month in 2011.
July also saw improvements in new applicant and viewing volumes, reversing the weakening trend seen in the first half of 2012. New applicant volumes were higher by 2% in July year-on-year, and viewing volumes were higher by 13%.
The supply of rental properties on the market, which rose earlier in the year, stabilised in the three months to July, with just a 0.7% increase compared to the same period in 2011. The ratio of new applicants to new instructions stood at 3.0 in July, down marginally from the 3.3 seen in July 2011.
Despite the headline rental decline for PCL, some areas are seeing rental growth, with rents in the City of London increasing by an average of 0.6% during July (up 2.1% over the past 12 months), while rental growth in Notting Hill hit 4.5% in the year to July.”