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Now the prime London sales slump is leading to lower rents, too

The dramatic slump in the prime central London sales market is now leading to a reduction in rents being achieved in the lettings sector too.

Yesterday we reported on Estate Agent Today that one agency claimed transactions were 60 per cent down from a year ago in some parts of prime central London - now another agency, Knight Frank, says the increase in supply of homes to let is pushing down rents.

“Higher stock levels have put downwards pressure on rental values which has boosted affordability for tenants, whose negotiation position has strengthened over the course of this year. Higher supply is the result of increased uncertainty in the sales market, which has meant a growing number of vendors opting to let rather than sell until more clarity emerges surrounding future pricing trends” admits Tom Bill, head of London residential research at Knight Frank.

“Annual rental value growth declined to minus 5.2 per cent in November, which is the weakest it has been since December 2009. However, we forecast growth will ease to minus two per cent in prime central London West in 2017 and remain flat in prime central London East” he says.

The number of tenancies agreed in prime central London was higher in the three months to November than last year, despite a moderate slowdown ahead of the Christmas holiday period, the number of deals in the three-month period was a hefty 23.2 per cent higher than in 2015. 

  • Kristjan Byfield

    London's biggest issue at present is the vast over-supply of premium & luxury apartments. Honestly, did developers really think there were that many buyers out their clamouring to get their hands on a 350 sq ft studio apartment for £800k+? Did they also think Landlords would by these with rents around £24k pa for a unit of this size but factor in upfront SDLT costs and lets not forget that a n apartment like this in London will carry service charges of around £5k pa and this area of the market has much higher void rates and its a recipe for disaster.
    The oversupply of this sector (both sales and rentals) has badly damaged the London market and is (IMHO) far more to blame for the current uncertainty than either Brexit or SDLT alone.
    The London market works as long as there is a suitable supply of first time buyers coming on the the first rung of the ladder. Quite frankly, how they get there is of little consequence as long as they do- and ideally with full ownership (part ownership is causing almost as many issues as its solving at present).

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    Your figures of £880l+ and rents of £24k with the service charge taken out shows a return of less than 3%. About what the banks are paying but only if they like you. So why does anyone want to buy a BTL in London?

  • Paul Smithson

    Eerrrr everyone jumping on the bandwagon, market overdue for a correction....but one this certain people always need somewhere to live.

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