The fall in annual rental growth in London’s prime central London property market slowed during January. This said, values are now 5% less than what they were at the start of 2016.
A new report from Knight Frank also indicates that rents in this particular sector have been slowing since May of 2015-partly due to the high levels of accommodation to rent.
Interestingly, the report suggests a fall in supply in the region could actually help the downward trend. While there was a 12% year-on-year rise in new rental properties during the final quarter of 2016, the figure was much lower than the rise of 30% in the first nine months of the year.
Tom Bill, head of London residential research at Knight Frank, noted that tax changes have also contributed to the slowdown of supply.
Bill observed however: ‘Demand continues to strengthen, particularly at the higher and lower end of the prime central London market.’
The report indicates that for rents above £5,000 per week, in the super-prime section of the lettings market, demand remains strong. The number of super-prime deals increased by 5% in 2016 compared to 2015.
In addition, the report indicates that the number of tenancies agreed in Prime Central London was 20% greater than in the final quarter of 2016 in comparison to a year previously.
Mr Bill believes that this is putting pressure on rental values, stating: ‘For rental properties between £1,500 and £5,000 per week, activity is improving but remains comparatively slower. The primary cause is that budgets for senior executives at financial institutions have been reduced due to the wider mood of economic uncertainty.’
‘While the UK’s decision to leave the European Union has raised some questions over the status of London as a leading global financial centre this trend for greater efficiency pre-dates Brexit and relates to the increased regulatory pressures on banks as well as a low interest rate environment that curbs profitability,’ he added.