End of year report shows a mixed outcome for London rental market
The London rental market has had a mixed outcome in 2012 but has largely been steady throughout the year, according to an end of year report from lettings section of agents Aylesford International.
It has seen an increase in enquiries throughout 2012 for properties ranging from £10,000 to £20,000 per week. Interest includes company moves, families wishing to rent before Christmas, or those living elsewhere wanting a London base.
It points out that lack of quality property at this level has encouraged vendors to become landlords. But the current economic state has resulted in a slow down in the market for two and three bedroom properties from £1,000 to £2,000 per week.
Overall there was a slowdown in activity during February and March, followed by a measured, steady increase from April to July and then a slowdown again during the Olympics in August.
Some 64% more flats were let versus houses, with a slight increase of 69% in unfurnished properties being let. Two bedroom flats were most in demand at 31% of properties let, followed by four bedroom properties, usually family houses, at 24%.
Some 42% of the firm’s tenants were families, 35% single people and 18% couples. Reflecting the increasing number of overseas owners in London, only 55% of landlords were from the UK with others from Europe, Russia and the USA. The majority of tenants were from the USA, closely followed by the UK, Europe, Australia and Israel.
Due to the firm’s location, 36% of deals were completed in SW10, closely followed by 20% in SW3, 16% in SW1, 12% in SW7 and 10% across W8 and W14.
‘Well presented properties that are realistically priced for the area in which they are located are benefiting from the most activity,’ said Catherine Cockcroft, head of rentals at Aylesford International.
‘The sales market is showing a degree of uncertainty whilst they wait for a decision from the government over their proposed annual tariff and tax changes. This, coupled with the turmoil and tax increases in some of the European countries makes the UK a more attractive place to live and work, so we anticipate an increase in tenants next year,’ she explained.
‘This demand will stabilise the central London rental market and should help to increase yields, therefore encouraging more investment into the London property market,’ she added.
Meanwhile, Kinleigh Folkard and Hayward, one of the capital’s largest independent estate agents, reports further signs of improvement to the lettings market.
Across the group’s network of branches, rents have increased by an average of 5% compared with the same time last year. In further evidence of pressure on prices, the average monthly rental price currently being achieved is £1,538 in comparison to £1,476 seen in 2011.
A number of areas have outperformed this 5% increase quite significantly and in some cases by more than double. In South West London, Balham and Tooting have both seen increases of 8%, while in North London Belsize Park has seen a rise of 10%. South East London however appears to be reporting the largest increases, with Surrey Quays seeing rises of 13% followed closely by Blackheath with 12% and Streatham with 11%.
Along with increased rental prices, tenancy lengths are also on the rise. The average length of tenancy at KFH has increased from 14 to 15 months year on year. Area’s where tenancy lengths have risen well beyond this include Crouch End and East Dulwich where tenancies are averaging 17 months.
‘The lettings market in London is experiencing growth as it becomes increasingly difficult for buyers to get onto the property ladder. We’re noticing rises particularly in areas that were once less popular and with the exception of Belsize Park, this overspill is becoming increasingly prevalent as the traditional core rental areas become too expensive for many tenants,’ said James Thornett, regional lettings director at Kinleigh Folkard and Hayward.
‘As rents continue upwards it is no surprise to see tenants requesting long and longer tenancies, as they attempt to lock in to their properties for the maximum time on offer. In such a frugal economy, many are keen to minimise the costs associated with moving as well as tenancy administration costs,’ he explained.
‘While this trend is an advantage to tenants, it is also gaining popularity among landlords who are keen to avoid costly vacant periods where their property could remain unlet. In quite a few cases, preagreed rent increases are also built into the tenancy agreement, to ensure that the rent keeps pace with the rising market,’ he added.