Rental market fragments as new builds lure tenants whilst uncertainty over Brexit stalls prime market
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The closing months of 2016 saw asking rents for luxury lettings and re-lets fall as new rentals rose, whilst economic uncertainty means 2017 remains unpredictable
North London’s rental market is experiencing distortion with asking rents for prime properties stalling whilst the sub prime rental sector is on the up.
Knight Frank reported that rental growth for London properties in the £1,000 - £1,500 pw bracket fell by 8.1 per cent in 2016, and those in the over £1,500 pw were down by 6.5 per cent.
Prime rental properties in areas where rents exceed £1,000 pw, such as St John’s Wood, primarily rely on tenants whose living expenses are funded by international companies in the financial, petrochemical and technological industries.
Current political events are compounding economic uncertainty. In her speech today the Prime Minister Teresa May’s announced that the UK “cannot possibly” remain within the European single market.
As such international companies unlikely to decide on staff movement until next month and prime rentals in north London will remain unpredictable.
Naomi Heaton, CEO of London Central Portfolio said: “Demonstrating a market dynamic which was conspicuous during the Credit Crunch, the uncertain economic outlook has resulted in tighter tenant budgets, putting a downward pressure on rents in the luxury rental sector, where rents are over £1,000pw. This has been compounded by increased numbers of properties to rent as owners defer sales in a softer market.”
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At the lower end of the market rents have risen as tenants gravitate towards newer, primarily one bedroom properties.
The latest audit by LCP revealed newly refurbished properties, or new lets, saw a 3 per cent rise over the 2016 forecast.
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Conversely re-lets, where older properties were let to new tenants, are down 1.6 per cent.
One bedroom properties performed the strongest, with rents up 4 per cent year on year.
Ms Heaton added: “With a greater level of availability, tenants can shop around and are increasingly attracted to newly refurbished properties (new-lets). They are also very budget conscious and look for good value. They will therefore opt for small units and prioritise location over size to get what they want.”