According to Knight Frank, a decrease in the amount of properties coming onto the private rented market in central London has caused an increase of pressure on rental values.
The company’s assessment reveals that the fall in house prices in central London appear to have reached its lowest and rental declines have also slackened.
The supply of new lettings for properties has faced a decline over the last 12 months due to a few contributing factors, including more pricing stability in the sales market and a succession of tax changes in recent years, affecting landlords.
Parts of London such as Chelsea, continue to face high demand with 25% more new prospective tenants registering in the year to April 2018 in compared to the last 12-month period. Moreover, the viewings for properties in Chelsea have seen a 5% increase, while Knight Frank granted 13% more tenancies over the corresponding period in Chelsea and the surrounding area. In addition, research collected by the Financial Times reveals that the housing shortage is a by-product of London’s economic success and ever-increasing population.
Sadiq Khan, mayor of London, has previously commented on the housing shortage issue, explaining the urgency for more emphasis on what proportion of housing stock is “genuinely affordable” for those currently on average incomes.
Arya Salari, Head of Lettings at Knight Frank’s Chelsea office reports: “Strong demand for Chelsea houses among tenants is the result of lingering caution in the sales market around higher rates of stamp duty.
“However, at some point this dynamic will reverse and it is increasingly common for tenants above £3,000 per week to insert a clause in the tenancy agreement that gives them first right of refusal to buy at the end of the contract.”
He explains that due to the high stock levels and the fact that it remains more of a tenant’s market, this trend is reversing, consequently placing pressure on rental values.