Prime London rents slump record 9.6%
Rents in prime central London fell 9.6% in the past three months, an all time record, as distressed landlords are forced to rent their properties at knockdown prices.
There has been an increased demand for rental property as a result of many people choosing to delay house purchases as the credit crunch sinks in, according to upmarket estate agent Knight Frank.
However, this has been outweighed by the sheer amount of new stock coming onto the market, much of it from "forced landlords", unable or unwilling to sell their property in the current market, according to the UK agent's monthly report.
Increasingly, those owning property in prime central London areas, such as Kensington and Chelsea, will be forced to rent out all or part of their property, as downward pressure on corporate and personal budgets, pessimism over the short-term future of the economy and mounting job losses in the City continue to drive down rents.
Liam Bailey, head of residential research at Knight Frank said: “Tightening budgets and reduced corporate expenditure also means that demand is strongest for properties at lower price points, which are overwhelmingly flats. Over the past quarter in prime central London, rents for properties priced at under £500 per week have fallen by only 2.4%, while those priced at over £1,500 per week have seen a fall of 15%. Rents for houses, meanwhile, have dropped by 17%, compared to just 8% for flats."
He added: “As a result, the owners of higher value properties – which are disproportionately houses – face either long void periods or a dramatic adjustment in their expectations of what rents may be achievable."
Charles McDowell, director of his own top-end property search agent, said he has seen a marked increase in interest for prime and super-prime flats, as opposed to houses.
Bailey said the fallout provides some good news for landlords. "Rents may be falling but base rates are at unprecedented levels, and those with tracker mortgages may find that their costs drop and margins increase."
The next year will offer yields, the rental income from a property calculated as a percentage of it's value, in excess of 7% on stressed sales and repossessions for the cash-rich acquisitive investor who can find a competitively priced property, particularly as borrowing and interest costs are dropping as base rates fall.
Tim Hyatt, head of UK lettings at the agent, said he expected the lettings business to continue growing next year. Renting has become an acceptable medium-term option for many people and its flexibility will continue to appeal as the economic downturn continues. The changing climate will also make investment more appealing for rental returns alone.
He said: "Landlords can be cautiously optimistic but need to be very flexible as they enter the New Year if they are to prosper in this difficult market.”
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