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.”

Download Knight Frank’s Prime Central London Rental Index for July 2012 (*pdf).

Rents increased by 5.9% in London compared to last year, says the latest RICS Residential Lettings Survey (May – July 2012).

In the coming 6 months, rents are expected to rise by 4.1% in London, and 3% in Scotland. Looking 12 months out, London rent expectations are stretched even further – 7.8% growth is expected.

The survey found that the yield is low in London- the average suggested to be 4.5%.

Ben Temple MRICS, Temples Clapham
We have seen supply increase by 200% in the last 3 months BUT we are only now back at “normal” levels and tenant demand remains good. Tenants are finding rents are becoming expensive so there are some price constraints on rental growth but with 10% plus growth for the last 2 years we don’t see landlords complaining.

Edward Reeve BSc, Edward Reeve Pimlico, London
The market remains very steady with all well presented flats letting almost immediately. It is most unusual to have to show a flat more than twice in order to secure a letting. Still never any void period at all between tenancies.

Tony How FRICS, Davis Brown London
Supply exceeding demand. Reduced number of corporate tenancies. Rent levels remain high compared to rents achieved.

Jeremy Leaf FRICS, Jeremy Leaf Co. North Finchley, London
Continuing demand especially from aspiring first time buyers still finding it difficult to obtain mortgage finance, is creating shortages of 1 and 2 bedroom flats as well as higher rents. Buy to let investors are still able to outbid purchasers on the bottom rungs of the property ladder.

Jilly Bland ARLA Member, Robert Holmes Wimbledon Village, London
The key change in market trends is landlord’s opting to sell rather than continue with an above average yield return and a good long term tenancy

Mark Wilson MRICS, Globe Apartments London

The Olympics are not good for business and we have been inconsistent since the Jubilee. Student demand looks to be well down on last year. We anticipate that the rental growth in the previous 12 months will be given up as prices continue to ease back.

Mary Musgrave MARLA, Cluttons Chelsea, London

The market has started to slow down on the approach to the Olympics Games and applicants are now registering their interest to begin tenancies from September. We anticipate a surge in rental demand again after the Games.

Nik Madan, John D Wood Kensington, London

Applicant demand continues to rise, and there is a marked rise in rental levels driven solely by the lack of available stock. Much of our client base is comprised of discretionary sellers, and we are seeing a clear trend of these clients moving their property over to the rentals market to take advantage of the higher rents in the short term (2-3 years) and then look to sell in the future. I anticipate that this trend will continue through the remainder of the year.

Download the RICS Residential Lettings Survey (May – July 2012) (*pdf)

Rents remained static in June, says the latest Knight Frank’s Prime Central London Rental Index.

Key findings:

- Rents remained flat in June (0.0%), following a 0.3% fall in May
- Rents were down on a three-month (-0.2%), six-month (-0.7%) and 12-month basis (-0.1%), indicating an overall downward trend
- New tenant registrations and property viewings were down (-0.2% and -0.4%) in the three months to May compared to the same period last year
- New property instructions were up 31%, while tenancies commenced were down 2.3%
- The ratio of new applicants to new instructions has fallen, from 3.6 in 2011 to 4.6 in 2012

Areas bucking the overall downward price trend:

- St John’s Wood (up 0.7% on the month, up 2.9% over 3 months, up 1.5% over 6 months, and down 0.4% over the year)
- Notting Hill (up 0.2% on the month, up 0.5% over 3 months, up 0.5% over 6 months, and up 3.9% over the year)
- Marylebone (up 1.4% on the month, up 1.1% over 3 months, down 0.1% over 6 months, and down 0.2% over the year)
- Belgravia (up 0.3% on the month, up 1.6% over 3 months, down -0.7% over 6 months, and up 0.2% over the year)
- The City (no change on the month, up 0.2% over 3 months, up 1% over 6 months, and up 0.9% over the year)
Demand is likely to pick up across the board in the coming months as families and foreign students seek to move into new accommodation ahead of the school and university terms beginning in September.

Full report: Knight Frank’s Prime Central London Rental Index June 2012

Today’s market update comes from estate agents Chesterton Humberts.

Key findings from London Prime Residential Lettings Market Spring 2012:

Despite the average residential increases of 9.7% experienced by Chesterton Humberts in Q1, a number of prime locations including Knightsbridge, Belgravia, Chelsea, South Kensington and Canary Wharf recorded rental falls. As corporate tenants still account for the main slice of demand in prime locations, the impact of job losses in the financial services industry and reduced corporate budgets has exerted downward pressure on rents.

Prime gross yields, as at March 2012, nudged downwards to 3.7%, as the slight drop in rents was accompanied by a stronger upwards movement in capital values.

The agency believes that rents will continue to rise in the prime locations, although have now revised the forecast for the year as a whole down to between 2%-4%.

As sales prices continue to increase and it gets harder to secure finance, in-betweeners (ie: people who are waiting to buy) are the fastest growing tenant group. As the private rental sector (PRS) benefits from an injection of capital and professional management this could bring about a long term change in attitude towards renting, to renting for choice rather than necessity.

Robert Bartlett, Chesterton Humberts’ CEO, comments: “The prime London residential lettings market is facing a variety of challenges this year and in spite of the ongoing economic gloom, overall rents are continuing to increase. Good quality rental properties are being let at record prices and in record time, however properties which don’t meet all of the criteria are suffering.

“Stock availability is no longer an issue in the prime locations and there is evidence of localised oversupply of stock available on short lets as a result of some landlords wanting to cash in on inflated rents during the Olympics. We have yet to see how this will impact on the rental market post-Olympics as many tenants have opted to delay moving until after the games when rent negotiations should settle back into a more normal pattern.”

Download the full London Prime Residential Lettings Market Spring 2012 (*pdf)

Annual prime London rental growth is down –0.4 per cent year on year, according to the new Savills prime rentals index, reflecting weak short term prospects in the financial and business services sector.

“The financial sector has long been the lifeblood of the prime London rentals market and rents have struggled to limp past their pre Lehman peak,” says Lucian Cook, Director of Savills research.

The profile of tenants has changed as a direct consequence of weakened sentiment, with a notable decrease in big ticket tenants employed in the financial sector in the prime central and east of City markets of Canary Wharf and Wapping. As such, there are a number of new and increasingly localised market forces being seen in the capital.”

Key findings from the research:

- Prime central London values remained flat over the past 3 months, while values are down -0.5 per cent year on year.

- Average rents across prime central London now range from £91 per square foot for the top quartile of rental properties, to just £41 per square foot for the bottom quartile.

- Stock levels have increased as overseas ‘safe haven’ buyers brought their investments to market, easing supply constraints and suppressing rental growth.

- The upper end of the market remains 5.0 per cent down on peak. Traditional high net worth occupiers looking to shelter wealth have been inclined to buy rather than rent, while those continuing to rent have focused on iconic, fully-serviced buildings, meaning the ultra prime market has become increasingly selective.

- Increased levels of corporate demand (up around 10 per cent) but in broad terms, the market is trending towards self-funded tenants, squeezing budgets and focusing demand away from the top end of prime central London.

- Demand from young, City professionals at the lower, £250-400 per week, end of the east of City markets is described as ‘red hot’. This has underpinned average values in these locations, where values rose 0.8 per cent in the past quarter, and are now 3.7 per cent over peak.

- Family demand is finally coming back to some key sectors of the prime market, where houses have underperformed flats over the past year, but its focus is shifting away from core central locations. This has particularly benefited the traditionally domestic locations of south west London. Here, international tenants have accounted for 52 per cent of demand this year to date, compared to 47 per cent in the second half of 2011.

- Families have returned to the markets of Kensington, Chelsea and Knightsbridge in the past few weeks and the £2,000 to £5,000 per week has shown signs of picking up after a few months of very slow trade. “Here, however, landlords are accepting lower rents to avoid missing the family house season, which traditionally runs through July, but is expected to be curtailed this year by the Olympics,” says Ingram.

- The biggest issue facing the private rented sector is the need to increase supply. Within the prime markets, changes to the stamp duty regime have increased the barriers to potential investors in central London, where the supply of quality properties to rent is crucial to ensuring demand from overseas tenants employed in the financial sector of the economy is accommodated within central London.

Download full Savills Research: Prime London Index, Q2 2012 (*pdf)

The prime higher and lower price brackets remain active but the mid-market is suffering from deflated demand, reveals Knight Frank’s latest Prime Central London Rental Index for May:

- Rents fell by 0.3% in May, reversing the 0.1% rise in April
- New tenant registrations were down 8%
- Property viewings down 7% in the three months to May compared to the same period last year
- New property instructions were up 21%
- Tenancies commenced were up 1%
- The ratio of new applicants to new instructions has fallen from 4.6 in 2011 to 3.6 in 2012

While supply is rising as keen landlords bring more properties to the market, the appetite for them is failing to keep pace – a reflection of continued uncertainty in the city employment market.

This is most evident in the mid-market – notably properties with two or three bedrooms in the £1,000 to £2,000 per week bracket – due to the fact that it is the mid-level city jobs that have been most affected by cutbacks. With the on-going troubles in the Eurozone and associated uncertainty in the finance sector, there is little sign of this reversing in the coming months.

The higher and lower rental brackets remain active however, with seasonal demand for family houses, with four or five bedrooms and priced above £2,000 per week, holding out as families look to settle over the summer before the academic year starts in September.

Reports that rental accommodation in prime London could be in short supply due to this summer’s Olympic Games have clearly not yet been borne out.

While this could be because the high demand for short lets simply wasn’t there, it could be argued that the demand was in effect removed by LOCOG, the London Organising Committee releasing a further 600,000 hotel room nights which were previously set aside for officials and the media but are no longer required.

Demand could pick up over the summer as more families search for their new home in time for their children to start school in September, and also as London’s foreign students, estimated to total around 102,000, prepare to arrive in August to secure accommodation for the new term.

Download full Prime Central London Index May 2012

Click on the image to view full size…

Stoke Newington in the London Borough of Hackney has landed on top of UK Burglary Hotspots according to the latest survey by landlord insurance provider JustLandlords.co.uk. The information is based on 1,000 home insurance claims.

We asked Alan Findlay of Abbotsinch Capital, East London landlord and writer, to comment:

Stoke Newington has traditionally been a melting pot of immigrants. Turks would live alongside Kurds and Hasidic Jews and more recently of course, Eastern Europeans. However, as the gentrification of Hackney gained momentum over the past five years, the gap between locals living in the large council estates that circle the area, and the victorian terrace dwelling ‘yuppy’ incomers has grown noticeably. A very English disease, the culture gap between young angry working class men surrounded by their braying privately educated counterparts, who bring the designer goods desired by the former, means no surprise to me that Stoke Newington has the highest rate of burglarly in the country.

Wood Green and Streatham also made it to the top 10.

Kensington Palace Gardens in May 2012

Demand picked up in all UK regions except London, where it moderated slightly, says the latest RICS Residential Lettings Survey February – April 2012.

Instructions dropped in London, as 22% more surveyors reported falling rather than rising instructions to let. Rents grew at the fastest pace inside the capital, but registered positive net balances in all regions. Looking ahead, surveyors are most optimistic about rents in London.

Yields continue to rise across all regions, except in London where they have fallen for the second successive period.

Alex Britez MARLA, Cluttons LLP Battersea/Clapham
“Huge increase in number of houses on the market for rental combined with a lack of families.”

Ben Temple MRICS, Temples Clapham, Lambeth
“There was a huge lack of available properties to rent in the first quarter of 2012. However tenant demand has also reduced so rental growth is starting to slow. We have seen 11% growth for the last 2 years and we expect between 5% and 7% this year. In April we have seen more properties coming to the market so this will help to moderate rental growth. We don’t believe the housing benefit changes will affect the private rental market in London.”

Edward Reeve BSc, Edward Reeve Pimlico
“Flats continue to increase at a modest rate. Still absolutely never any void periods at all.”

Jeremy Leaf FRICS, Jeremy Leaf & Co. North Finchley, London
“A quarter of two halves! The first was very busy partly reflecting aspiring FTBs unable to find affordable homes to purchase so deciding to rent. The second half settled down to expected activity levels – though shortages of 1 bed flats and 3 bed houses remain. New lettings achieving higher rents than renewals which reflects substantial increases in the past twelve months.”

Mark Wilson MRICS, Globe Apartments London
“The quieter start to 2012 continues and rents are falling. Adjustments are notable to reflect the absence of students who must
be sleeping on the floor as they are not renting flats. Watch out for adjustments to a decimal point, they are more significant!

Miss Sophie Murray, Cluttons Holland Park, Kensington and Chelsea
“There seems to be very few people looking at present.”

Nik Madan, John D Wood & Co. Central London
“Tenant demand continues to grow, fuelled in the main by people moving to London for work, as well as those would-be buyers who cannot find suitable properties or who are having difficulties securing lending. A shortage of rental stock remains and we are seeing multiple bids on many properties, particularly on flats. As a result, rents are rising. Barring any major economic changes, we anticipate that this trend will continue through the year.”

Richard Hole, Cluttons Belgravia
“Money is still tight, Tenants are being very picky and taking their time viewing everything before making a decision at all ends of the Market. Given a chance they will stay where they are.”

Notting Hill in May 2012

From the latest Knight Frank‘s Prime Central London Rental Index April 2012:

- Rents increased by 0.1% in April, following falls in the preceding six months
- Rents have now risen 1.2% over the past 12 months
- New tenant registrations (up 5% year-on-year in the three months to April) are not keeping pace with new property instructions (up 56%)
- The ratio of new applicants to new instructions was 2.9 in April compared to 4.3 a year earlier

Prime central London rents increased in April for the first time in six months. Although the rise was just 0.1% and followed falls totalling 0.8% in the six months to March, rents have now risen by 1.2% over the past year.

But landlords should not expect a rapid rise in rents in the next few months, as demand is currently failing to keep pace with supply. Although new property instructions were up 56%, and new tenancy starts were up 40%, in the three months to April compared to the same period in 2011, new tenant registrations were up by just 5% and property viewings up by 15%.

Further confirmation of this gap comes in the form of the ratio of new applicants to new instructions, which last year stood at 4.3 and this year, to date, stands at just 2.9.

This can be explained by the continued lull in the City employment market and restricted budgets, both individual and corporate. It can also be attributed to the continued strength of the sales market in prime central London, which is encouraging some to buy rather than rent.

Within the prime market, there are differences in performance. Belgravia for example saw prices rise by 1.2% in April while Hyde Park saw a 0.9% fall. And while some two- or three-bedroom houses in the £1,700 to £1,800 per week price range in Knightsbridge, for example, are failing to attract attention, properties in certain developments in the area are proving quite the opposite and achieving good rents.

Knight Frank’s view remains that we will see a modest growth in rents (1%) in 2012.

View the full Prime Central London Rental Index for April 2012.

According to the latest market update by estate agents Napier Watt of Mayfair, the situation for tenants is fast improving:

The market is now experiencing a plateau with regard the expected level of rents, and are even seeing a reduction in the mid to upper range of rents, ie between £1000 + . Rents are predicted to stay firm for 2-bedroom apartments, expected to fall for 3-bed and high end properties, and expected to continue to rise for prime one bedroom units as demand outstrips supply, although, it is unlikely they will achieve the huge premiums they did this time last year due to prospective Tenants being pretty price savvy in Mayfair, Marlebone, Knightsbridge and other areas within Prime Central London.

Up until recently rising rents have prevented tenants from moving as the open market only offered comparable property’s at a higher rate. This new found stability in rental levels has ultimately created more fluidity within the sector although, due to the current economic situation there are far less corporate Tenants on the move, as companies tighten their purse strings.

Headlines from Knight Frank‘s Prime Central London Rental Index for March 2012:

- Rents fell a further 0.1% in March, and have been falling since October 2011
- The six consecutive monthly falls total just 0.8%
- Q1 rents are still 1.2% higher than they were in Q1 2011
- Prices in the £500 to £1,500 per week band performed better than the £1,500+ sector

Download the full report here

“The shift towards Rental Britain shows little sign of slowing in the near future. Britons paid in excess of £48 billion in rent to private and institutional landlords. This figure is forecast to rise to exceed £70 billion by 2016.”

Click here to download the brand new Rental Britain report by Savills and Rightmove.

Knight Frank‘s reports that the average prime London rental prices have fallen by a further 0.2% in February. The rents have now turned negative on a three-monthly basis, down 0.4% and are now close to June 2011 levels.

The current round of rental price falls relates to weaker conditions in the central London employment market, argues Liam Bailey, Knight Frank’s Head of Residential Research.

The rapid rebound in rental levels between mid-2009 and late-2011, when rents rose by 26.9%, was driven by a revival of the central London economy, following the ravages of the credit crunch and global recession.

By October last year, rents had recovered all losses sustained in 2008 and early 2009, and hit an all-time high at 1.8% above their previous peak in March 2008.

Further growth from here was dependent on continued demand-side expansion. But with job losses in the City beginning in Q3 last year, demand began to fall back a little in October.

While employment prospects in central London are still weak, there are some encouraging indicators for landlords. The volume of new tenant registrations rose 23% in the three months to February compared to the same period a year earlier.

While supply has also risen, it has done so at a slower rate. New property instructions are higher by only 13% over the same period.

An additional measure confirms conditions in the market are beginning to improve in favour of landlords, with the ratio of new applicants to new instructions rising from 3.1 to 3.5 over the past year.

Yet again the strongest part of the market remains the lower price ranges, with average rents in the £500 to £1,500 per week bracket down by only 0.1% in the three months to February, compared to a decline of 0.9% in the £1,500+ per week bracket.

Tim Hyatt, Head of Knight Frank residential lettings, comments, “After such a considerable rise in rents and the Christmas slow down which was endured pre and post-Christmas, it is not surprising that rents have dropped by a marginal amount over the course of the last three months.

“Corporate employment is key to the rental market but it is too early in the year to predict the true picture of what rents will do over the course of the next 6-12 months. We are already seeing demand beginning to pick up and most of our offices are reporting the healthiest instruction book yet. I am sure these properties will let quickly and rents will continue to rise, subject to no further cut backs within the City.”

Knight Frank’s Central London rental offers.

Currell, the estate agent with offices in  Clerkenwell, Hackney, Victoria Park and Islington, reports that the tenant demand has grown significantly compared to the previous year:

January saw us create 13% more tenancies than January 2011, whilst February looks like it’s going to be 22% up on February 2011.

The early months of any year are typically amongst the quietest in lettings, but we’re experiencing very strong tenant demand. Our feeling is that there is not enough lettings stock to satisfy this demand; applicants registering with us relaying this to us in the way that they always do, “no one’s got anything!” The only caveat to this being that the upper end of the market (+£700 per week) is a little quiet, but this is a seasonal norm and we expect it to pick up over the next few weeks.

If you are considering purchasing another, or your first, rental property we can honestly say that now is as good a time as it has been in recent years – if not the best. New build apartments and houses will normally provide a far stronger yield than period properties (certainly at this precise moment in time), whilst they also typically fulfil the main requirements of most tenants – clean, contemporary accommodation.

Check out Currell’s rental offers.

Knight Frank’s Prime Central London Monthly Rental Index for January 2012 has just been released and here is what it says:

- Residential rents in prime central London property fell back by 0.2% in January, meaning rents are now 0.6% below their September 2011 peak

- Despite the recent monthly falls residential rents are still around 7% higher than a year ago

- The key drivers for the recent weaker residential rental performance in central London are: City of London job losses and, ultimately, affordability for tenants.

Liam Bailey, head of Residential Research at Knight Frank said: “Rental falls in winter are not uncommon, the employment market is quieter and less people are typically looking to move to new positions.

“However there are signs that the weakness in the City of London jobs market, where new employment vacancies are down 51% year-on-year at the current time (according to Morgan McKinley), is beginning to feed through to the rental sector.

“With the banking sector expected to deliver much lower bonuses in the first quarter of 2012 compared to last year, tenants who are building deposits for eventual entry to the housing market are looking to reduce their rental costs in the interim.

“Additionally rental budgets for corporate tenants, employees who have been relocated to London by their firms, have been cut back by anything up to 15% over the past 12 months.

“The other main driver helping to push rents lower is affordability. Tenants saw rents rise 27% in the two years to September 2011 – hitting all-time highs at that point. At best, disposable income even in central London, only rose by around 8% over the same period – landlords are having to accept that continually rising rents are not a fixture of the market.

“In terms of sub-market performance, across central London there is a particular shortage of prospective tenants looking in the mid-market, a definition which varies depending on the area, but is typically around £800 or £1,000 to £2,000 a week.

“Activity has been strongest at the lower end of the market and to a lesser extent, the top-end. The sub-£1,000 a week bracket has seen more demand recently as people have been tightening their budgets, with both individual tenants and companies housing corporate tenants.

“The £4,000+ per week bracket has also been active, especially in Belgravia and Knightsbridge with the arrival of a number of Russian tenants at this level of the market.

“Our view looking ahead is that rents will begin to rise slightly from the spring onwards. We are not expecting significant rises from here.”