Growth in prime central London rents are heading towards positive territory for the first time since January 2016, according to the latest Prime Central London Rental Index from Knight Frank.
The report also shows that, while demand for rental properties in prime central London remains robust, levels of new supply have declined. This comes as more certainty returns to the sales market and more landlords explore a sale due to recent tax changes, such as the reduction in mortgage interest tax relief and the removal of the Wear and Tear Allowance.
Easing supply and robust demand has put upwards pressure on rent prices, which means that prime central London rents are now heading towards positive territory. The last time that positive annual rent price growth was recorded in this market was in January 2016.
Some parts of prime outer London have experienced rent price growth in recent months, following a period when all areas were recording declines.
In a similar fashion to prime central London, rent price growth has returned in prime outer London, as levels of supply have begun to recede. The number of new property listings in the year to March 2018 was 6% higher than in the previous 12 months. The equivalent increase in March 2017 was 51%, as more owners decided to list their properties to let in response to an uncertain sales market.
The report goes on to explain that swap rates have moved upwards over the last six months, as expectations of an interest rate rise mount. However, there has been a small dip in recent weeks, as economic data, including a lower than expected rate of inflation, has reduced the likelihood of a rise this month.
The number of rental properties coming onto the market and the total stock of available properties to let has dropped across Greater London, as some landlords explore a sale following the Government’s recent series of tax changes.
With competition rife among tenants in prime central London, it is essential that you set the right rent price. However, as prime central London rents begin to rise again, landlords should be prepared for potential tenant rent arrears.
If you own rental properties in these areas, it may be wise to consider taking out Rent Guarantee Insurance, which protects your rental income against tenant default. We offer instant online cover here: https://www.justlandlords.co.uk/rentguaranteeinsurance