Rents across prime central London fell by 0.5% month-on-month in October, continuing a period of lacklustre rental growth seen since the end of 2011. The decline in rents so far this year stands at 1.7%.
However, despite an ongoing decline in average rents, demand for rented accommodation in prime central London remains high. The number of new applicants registering their interest in the prime central London lettings market is 10.1% higher over the first 10 months of 2013 than the same period last year. Property viewings by prospective tenants are also up over the same period, by 9.3%.
As a result of this increase in demand, Knight Frank Residential Research analysis of market activity shows that the number of new tenants moving into prime rented accommodation in London over the two months to October 2013 was at the highest level ever.
But in spite of the increase in lettings activity, rents in prime central London have been falling or unchanged for 18 consecutive months. While the decline in the number of tenants from the financial sector as a result of the global financial crisis is partly to blame for falling rents in the prime market, it is being offset by an increase in demand from tenants from other industries. The growth of the technology, media and telecoms sectors and legal profession in London, for example, is boosting demand from tenants from within these sectors.
Assessing rental movements by price band we can confirm that the £500-£1,500 per week price bracket saw a 1% decline in October compared to the previous month, and a decline of 2.6% over the year-to-date. In comparison properties in the £1,500+ per week bracket fell by 0.3% in October and have fallen by 1.2% in 2013 to date.
While the headline figure indicates that rents in prime central London are declining, performance is varied across markets. In Mayfair, Hyde Park and Notting Hill rents have declined by 6%, 3% and 2.4% over the year-to-date. Rents in the City, however, are unchanged in 2013 and in Marylebone rents have risen by 2.2% so far in 2013.
Although prime residential rents have continued to fall so far this year, they are still almost 22% higher than they were during the market trough in the second half of 2009. The improving economic and employment picture in London, with sharply rising economic sentiment, as evidenced by our recent House Price Sentiment Index informs our positive outlook for rental growth in 2014 and in 2015.
