Rental Decline Slowing Down in Prime London
By |Published On: 19th February 2019|

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Rental Decline Slowing Down in Prime London

By |Published On: 19th February 2019|

This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.

Rental values in prime locations across London have seen some signs of a slowdown in decline, as initial signs of a bottoming out have appeared.

International property consultants, Savills, have reported that rental prices in London have declined by 0.8% in 2018, with cheaper properties significantly outperforming more expensive ones.

Properties with rental prices of up to £500 per week have seen a five-year price growth of 6.6%, but properties with rents of up to £3,000 have dropped by 19.5%.

What are the predictions for rental prices over the next few years?

Savills predicts that rents will rise going forward, over the next five years they predict an increase of 11.5% on average, with a 12.6% increase in the prime commuter zone. However, growth is expected to be slow or non-existent in the short term, as the political and economic uncertainty surrounding Brexit continues. Rents fell by an average of 9.6% across London’s prime areas since the referendum in June 2016.

What’s the demand for properties likely to be?

London’s commuter belt, the prime rental market of London, has seen a steady demand for smaller properties. This matches the need of younger tenants commuting to the city for work, and rents for one or two bedroom properties have seen double digit growth over the past five years.

The outlook for rental prices seems to be largely reliant on stock levels, and if the sales market improves, it could see many accidental landlords exiting the private rental sector. Similarly with recent restricted tax relief on interest payments and other changes recently, such as the stamp duty levy on buy-to-let properties, there are uncertainties regarding the availability of rental properties.

Head of Residential Research at Savills, Lucian Cook, said: “We are seeing footloose, cost-conscious tenants drawn to prime areas that offer greater value, rather than confining their search to premium addresses, and there’s a deeper seam of demand for smaller properties driven by needs-based younger tenants.

“But that doesn’t mean we can anticipate falling rental supply. Instead, we expect cash investors to become increasingly dominant, especially in central London, while history suggests international investors will become more active as uncertainty clears, particularly if they can play the currency card. Stock levels also look set to rise as the number of new build homes completing increases.”

About the Author: Em Morley (she/they)

Em is the Content Marketing Manager for Just Landlords, with over five years of experience writing for insurance and property websites. Together with the knowledge and expertise of the Just Landlords underwriting team, Em aims to provide those in the property industry with helpful resources. When she’s not at her computer researching and writing property and insurance guides, you’ll find her exploring the British countryside, searching for geocaches.

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