Rent value declines in the prime central London lettings market are continuing to bottom out with the annual fall easing to 4.9% in February 2017, the latest research shows.
The quarterly rate of decline fell to just 0.7%, the lowest level since November 2015 and overall the number of new tenancies agreed was 22% higher year-on-year in the six months to February.
The data from the Knight Frank prime central London lettings index also shows that demand is stronger in the upper and lower rental markets with the annual rate between £250 and £500 per week down just 1.2%.
Below £1,000 per week activity is particularly strong and Tom Bill, head of London residential research at Knight Frank said it has been bolstered by continued strong demand from students, a greater acceptance of renting as a tenure model by young professionals and the fact some corporate accommodation budgets have been cut, increasing demand in lower price brackets.
Month-on-month the market is showing signs of picking up. In the £250 to £500 per week sector the fall in rent was just 0.1%, in the £500 to £750 sector it was unchanged, in the £750 to £1,000 bracket it was 0.8%, in the £1,000 to £1,500 bracket a fall of 0.5%, in £1,500 to £2,000 sector rents were down just 0.8% and for £2,000 plus it was a fall of 0.1%.
Bill explained that the amount of lettings property coming onto the market in prime central London has risen over the last 12 months as uncertainty grew over pricing in the sales market following a succession of tax hikes.
“This was compounded by political uncertainty surrounding the European Union referendum,” Bill said, adding that while the annual increase in new lettings properties on the market was 51% last June, this figure had eased to 23% in February.
However, demand is slower between £3,000 and £5,000 per week, a market where demand has traditionally been strong among senior executives in financial services.
“A recent series of news stories about banks cutting staff bonuses underlines the ongoing financial pressures they face. It means landlords at this price point frequently have to make double digit percentage reductions to asking rents to prevent void periods,” Bill pointed out.
Meanwhile, demand in the super prime lettings market above £5,000 plus per week remains robust. There were twice as many deals done above £5,000 per week in the first two months on 2017 compared to last year, LonRes data shows.