'Correction' in London market as City gets jobs jitters

Cluttons says that there has been a ‘correction’ in the central London lettings market.

It said a ‘remarkable’ period of consistent year-long growth of nearly 9%, reaching a level 10.3% above the market peak in Q1 2008, appears to have come to an end.
 
The firm said rents fell by 0.4% in Q4 last year, and it expects further falls.

Cluttons said that lack of promotion and nervousness over job prospects in the City has led to increased price sensitivity among tenants and, consequently, greater flexibility from landlords, who are keen to keep good-quality tenants in place and minimise void periods.
 
It said that employers have also slashed or chopped entirely their corporate housing allowances, leading tenants and relocation agents to look for lower value areas.

Some prime central London landlords are adjusting their expectations and accepting lower offers, said the firm, which has noticed an increase in the number of sharers around the capital who are looking to contain costs.
 
Lynn Hilton, partner for residential lettings at Cluttons, said: “The remarkable growth in rental values seen last year could not continue, and this correction in values will bring the market back to a more stable level.

“While there is considerable economic uncertainty, we don’t anticipate a drastic reduction in rents as demand is still high, but tenants will undoubtedly welcome increased choice and negotiating power.”
 
Meanwhile, a huge gap is opening up between landlords’ expectations in London and the rest of the UK.

The Young Group, which operates various services for property investors, has measured landlord confidence since 2007.

It says that for the first time, 100% of property investors expect that property values in London will stay put or rise this year, whereas outside London, less than a third (30.4%) think house prices will go up.

Averaged out, investors expect London house prices to go up 4.73% and down 1.39% everywhere else.

The latest Young survey also shows that four in ten investors want to add further London properties to their portfolios this year.  

Most London landlords (85%) expect rents to rise in London this year, compared with 79.5% who think rents outside London will go up.

Landlords also appear extremely committed to their portfolios, with almost all (98%) having no intention of liquidating their property assets this year, and 37% planning to hang on to them for at least 20 years.

The chief worry for landlords is mortgage availability, followed by concerns over unemployment.