March 2, 2011
London Landlords Rent Increase Windfall Predicted
Average rents in London grew by 11.5 per cent in 2010, according to latest analysis from the Savills research team. As a result, rents are forecast to grow this year by an average of 8 percent across prime London and 7 percent in the prime central zones. This compares to a 1.0 per cent growth forecast for capital values across the capital this year.
The prime London rental market is now characterised by severe stock shortages and very high levels of demand, a combination that will underpin the strong price growth seen last year says the property specialist.
Growth in 2010 was supported by a general lack of investment properties available to rent at a time when increased demand for rental property, particularly from corporate tenants, was recovering.
These trends were particularly acute in prime North London (including Hampstead and Islington) where they resulted in exceptional growth of 17.6 percent last year.
Demand is running at an all time high in these areas, suggesting that 2011 will be a second year of very strong growth in rental values.
Demand outstripped supply across prime London, says Savills, resulting in rental growth in all areas: 5.1 percent in prime Central London, 10 percent in prime South West, 10.8 percent in prime East of City and 17.6 percent in prime North London.
“Stock shortages persist which is good news for landlords,” says Jacqui Daly, director, Savills residential research.
“The dynamic of constrained mortgage markets, of buyers adopting a ‘wait and see’ approach, a lack of new build supply, a return of corporate tenants, improving employment prospects and the reduction in accidental landlords, means that strong rental growth will continue to characterise the market in 2011.”
The lower tiers of the prime London rental markets have seen the strongest growth in 2010 as caution amongst tenants and reduced corporate allowances have concentrated demand for smaller properties.
In prime South West London the particularly strong sales market in 2010 reduced the supply of rental properties available as accidental landlords returned properties to the sales market.
Additionally, needs-based family demand has persisted, pushing rental values up. Both houses and flats saw similar levels of rental growth reflecting the broad tenant base and variety of budgets in this market.
“We expect to continue to see a growing number of UK tenants at all levels and from all age groups and walks of life,” says Jane Ingram, head of lettings at Savills.
“Renting is now considered a perfectly acceptable way of life in the UK, whether you simply can't afford to get on the housing ladder, want to try an area before buying or need to rent out your own home whilst renting a bigger/smaller one or in a different area to be close to schools or loved ones.
