An analysis by investment specialists London Central Portfolio reveals that in areas of central London swamped with new builds coming to the rental market at roughly the same time, typical asking rents have fallen by six per cent in the past quarter as a result.
The number of available properties to rent around the Battersea and Nine Elms areas, with the postcodes SE11, SW11 and SW8, has increased by 28.1 per cent according to the analysis of quarter one 2017 compared with the same period of 2016.
LCP says that HomeLet statistics and recent market assessments highlighted a slowdown in London rents, generally attributed to Brexit. However, LCP says the reality is “a more nuanced picture for the lettings market” which is now being impacted by a proliferation of new developments, resulting in supply beginning to outweigh demand in some areas.
According to LCP the London market south of the river is beginning to suffer as large numbers of the planned 22,000 units between Battersea and Nine Elms have come to market. Typically purchased by foreign buyers as rental investments, LCP says this demonstrates a significant annual increase in available rental properties in this area amounting to 28.1 per cent, accompanied by that six per cent rent drop.
The number of properties actually let has dropped 14.8 per cent over the same period and there has been a fall in achieved rents of 2.8 per cent. This is due to tenants increased bargaining power and has been exacerbated by high asking rents for flats in new developments, at a time when corporate housing budgets are being tightened.
“There is increasing fragmentation in the lettings market, according to property type - new build or traditional stock - and by price point. Alongside the oversupply of rental stock in new build heartlands, the uncertain economic outlook has resulted in tighter tenant budgets” says Naomi Heaton, chief executive of LCP.
In Prime Central London, where stock increased by just five per cent, rents have not been negatively impacted and have risen 1.5 per cent over the last three months. The number of properties being let has also seen a 2.5 per cent increase over the same period.