As uncertainty continues on the global stage, hard Brexit edges ever closer and increased taxation impacts the marketplace, stock levels of Prime Central London’s rental property have increased dramatically. Many landlords have opted to let their properties rather than sell them in the current market where vendors are seeing deep discounts. Over the last 3 months, the number of properties to let has increased nearly 3 times from 8,834 in the previous 3 months to 24,761, according to industry website Lonres.
With this increased level of competition, tenants with more choice are increasingly attracted to good value newly refurbished properties, seeking a complete ‘lifestyle’ experience from the moment they walk in the door. This has meant that weekly rents for refurbished flats have performed best this quarter with new lets achieving a 3.6% uplift over anticipated rents, according to London Central Portfolio’s (LCP’s) latest lettings audit.
LCP has seen one bedroom properties continue to put in the strongest performance with weekly rents now averaging £460 - up 5.3% over expected returns. 2 bedroom properties, however, are becoming more popular again as they start to represent particularly good value. Weekly rents now average £700 - up 1.5%.
Naomi Heaton, CEO of LCP, said: “Newly refurbished properties, in areas with good transport links, continue to attract tenants willing to pay premium prices. However, the squeeze on rents during the Credit Crunch as corporates underwent stringent belt tightening has not fully relaxed. This has meant small properties remain the most popular with the lowest void periods, now averaging 26 days for one bedroom units. The influx of international students, the children of HNW families, often living on their own, has added to this demand. This month, during the rush period before the start of the academic year, we have let 55% of our properties to students”
However, with the current high levels of supply, rents for re-lets of older properties have remained largely static this quarter.
Heaton explains: “The static picture for re-lets can be attributed to the growing negotiating power of tenants as stock levels have trebled, many of which are ‘not-so-new’ properties. However, with tenants often electing to ‘stay put’ rather than deal with the hassle of moving, this has been compensated by renewal increases, averaging 3.1%, from tenants in-situ. Landlords, therefore, should look to retain existing tenants if possible rather than re-marketing in the hope of achieving higher rents. They may also need to be open to carrying out remedial and upgrade works between tenancies to remain competitive at re-let stage.”
Heaton concludes: "Across the rest of the year and into 2017, landlords may seek to recoup the increased entry and running costs due to the Additional Rate Stamp Duty and the forthcoming reduction in mortgage interest relief. This may lead to a further hardening of rents across the board. For tenants with the flexibility to move, now may be the optimum time to secure the best deals before Landlords act to counter the tax headwinds.”
