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Rental growth continues to soar

Mainstream rental growth has been particularly pronounced in Greater London where average residential rents rose by 16% in 2010.

The prime rentals market is also seeing strong price growth.

Average prime London rents increased 3.4% in the first three months of 2011 and by almost 12% in the past 12 months, latest analysis of the Savills prime London rentals index shows.

This growth shows no signs of slowing, and outpaces the 2.8% growth seen in Q1 2011 of the underlying value of properties according to latest analysis from Savills.

"This value dynamic will push out yields and attract investor interest, and there is clear evidence that investor buyers are already emerging from the shadows," said Yolande Barnes, head of Savills residential research. 

Central London rents are traditionally driven by demand from corporate tenants from overseas which focuses on the high value prime areas and which has been on the increase since the recovery in the financial and business services sector in 2009. 

Boosted demand, coupled with fewer frustrated sellers or "accidental landlords" providing supply into the market following two strong selling seasons, means that rents have risen since the beginning of 2010 and steeply in 2011.

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