Prime central London rental values continued to rise in May and annual rent growth of 4.2% was the highest since December 2011, a report has revealed.
Prime London Rents Up but Price Growth is Stagnant
This positivity compares to a 1.4% drop in May 2014. The upward energy in the last 12 months has been fuelled by the recovering UK economy and a transfer of demand from the sales market, which diminished ahead of the general election, found the report by Knight Frank.
The document says that buyers were hesitant before the election and the two bank holidays caused a slower market compared to last year.
The amount of prospective tenants was down 12% in May compared with May 2014 and the number of viewings fell by 18% in the same period.
Despite the recent drop, new prospective tenants and viewings in the 12 months to May were up 12% and 7% correspondingly. Activity is forecast to increase over the summer as a normal seasonal trend sees students, families and corporate tenants showing interest.
Demand has stayed strong in areas such as Marylebone and Hyde Park, particularly in lower price brackets. This indicates that companies and private tenants are still being careful despite the improving economy.
Prime market gross rental returns rose slightly to 2.96% in May, the highest seen since August 2013.
The prime central London sales market has experienced lower annual growth than any time since the previous general election in 2010. Despite prices increasing 0.3% in May, the annual 2.3% rise is the smallest since November 2009.
Head of London Residential Research at Knight Frank, Tom Bill, says: “This relatively low level of growth underlines the gap between the expected impact of the result and the reality of a property market still digesting a series of tax changes.”1