Rents unchanged in Prime London

Prime London rents were unchanged in May, bucking the downward trend the prime market has seen over the past year. Here Liam Bailey, Global Head of Knight Frank Residential Research assesses whether this could mark a return to growth for London’s luxury rental market…

“In May, prime rents in central London were static, the first month that rents in the capital’s best postcodes haven’t declined since June 2012.

“The annual fall in rents now stands at 2.9%. Underpinning the weaker dynamic over the past year has been the health of financial sector employment market, which continues to bear the brunt of weak economic activity in central London. Job vacancies in the City were 22% lower in April than the same time last year, according to Morgan McKinley’s London Employment Monitor.

“While the financial sector still has hurdles to overcome, activity levels in London’s luxury rental market suggest that here a healthier picture is emerging. The number of new tenancies agreed in prime central London is up by 39% so far this year compared to the first five months of 2012. Additionally, the number of new applicants is up so far this year, by 14%.

“The ratio between prospective tenant registrations and newly available properties, which stood at 3.0 in the first four months of 2012, has widened to 3.8 in the same period of 2013.

“The higher levels of activity in May have helped bring an end to ten months of declining rents. But while the general trend was for rents to remain unchanged during the month, there are pockets of rental growth within prime central London. Rents rose by 1.4% in St John’s Wood and by 0.1% in Kensington during May.

“In the year to date, rents in Kensington and Marylebone have risen by 2.6% and 1.9% respectively. Other markets where average rents have increased in 2013 include Belgravia, by 0.3% and Knightsbridge, by 0.2%.

“Our view, informed by a positive outlook for employment and business sentiment, as well as the cost barriers to owning a home, remains that rents in prime central London will increase by 1% this year, before posting stronger growth in 2014 and beyond.”

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