However despite of the ongoing decline in rents, activity levels in London’s luxury rental market suggest that demand for rental property remains high. The number of viewings conducted in prime central London so far this year is up by 11.9% compared to the same period in 2012. Additionally, the number of new applicants is up over the same time by 9%.
But Liam Bailey, global head of residential research at Knight Frank pointed out that the prime rental market in London remains closely tied to conditions in the business and financial services employment market and the ongoing weakness in the Eurozone economy have contributed to falling rents.
Sub £1,500 per week rents for example, a section of the market which has traditionally been supported by affluent City workers, have fallen by 1.3% over the year to date and are 3% lower than they were a year ago. Above £1,500 per week, rents are 0.9% lower over the year to date and 2.6% lower on an annual basis.
Data from financial sector recruitment specialist Morgan McKinley indicated that in the three months to July 2013 there was a gradual rise in job availability month on month. But job opportunities remain at a lower level than the same period of 2012.
‘However, confidence in London as a business centre remains high, with expansion in the technology, media and telecoms sectors in particular driving demand for corporate lettings. News that investment banks including Nomura, Citigroup and Bank of America have started hiring dealmakers and traders in Europe is a further source of good news,’ said Bailey.
The August fall in prime central London rents follows a 0.4% fall recorded in July. And the annual decline in rents across the capital’s best postcodes now stands at 2.7%.
‘Rental performance has been weaker for larger and more expensive properties, with greater resilience being displayed at the more affordable end of the market,’ added Bailey.
Over the past month rents have fallen more for houses than for flats, with a fall of 0.6% and 0.3% respectively. Rental falls have also been more notable in the £1,500 plus per week bracket than in the £500 to £1,500 per week bracket this year.
While the headline figures confirm that rents continue to fall there are different performances according to location. Rents in Mayfair have declined by 4.2% since January. In St John’s Wood and Notting Hill average rents have also slipped in 2013 by 3% and 2.1% respectively.
In contrast, rents for properties in Marylebone, Kensington and Belgravia have risen so far in 2013 by 1.7%, 1.6% and 0.1% respectively.
‘Our view remains that it will be 2014 before we see more robust rental growth, however this will require a sustained improvement in central London job creation,’ added Bailey.
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