The amount of residential rental stock in London was 25% higher in the fourth quarter of 2016 than a year earlier, figures from industry firm LonRes and analysed by London Central Portoflio, (LCP) have shown. That higher level of rental property in the capital follows a softer sales market, which has helped encourage more home-owners to rent their property rather than sell it.
“Brexit uncertainty continues to dampen the London property market with activity remaining slow,” said London Bridge estate agent Williams Lynch. “Unfortunately, this is a trend that is set to continue for many months, if not years, while agreements are made and details hashed out.”
But, while a rise in the availability of rental homes often translates into downward pressure on rents, that’s not the case for newly refurbished one-bedroom, city properties. Popularity of newly-finished one-bedroom homes has pushed average rents paid for them, up by 4% from a year earlier, with void periods sinking to a one-and-a-half year low of 17 days.
Looking at the re-lettings market of older properties, however, it’s a very different picture. Average rents in that sector fell 1.6% in the final three months of 2016 compared with the same period a year earlier.
“An increase in rents achieved for freshly renovated, smaller properties highlight that people are willing to pay for the comfort and convenience of a nicely decorated apartment that’s also close to the city,” said Wimbledon estate agent Robert Holmes. “It appears location and convenience are taking priority over space and cost, at the moment.”
But, these data relate to the ‘mainstream’ London rental market where properties rent out for £1,000 per week or less. The luxury, rental market – where rents are over £1,000 per week – was more downbeat.
Data from Knight Frank reports that for the London rental sector between £1,000 and £1,5000 per week, rents were 8.1% lower in 2016 than they were in 2015. Rental properties costing more than £1,500 per week, meanwhile, experienced a more modest decline of 6.5% over the same period.
That suggests that the availability of stock in the luxury London rental market also expanded during 2016. However, renters are taking stock of their requirements and choosing their home accordingly with the more expensive rental properties losing out or prospective tenants negotiating harder for a lower monthly rate.
“It’s interesting to see the tables turn on the luxury London rental market, particularly after rents have been climbing for a number of years,” said LDG, central London estate agent. “However, the longer-term future outlook is better, with mild growth expected by a number of economists and property market experts. But, that won’t start to happen until the UK’s business and economic concerns over Brexit have been laid to rest.”
Those concerns look set to rumble on for some time, particularly in light of Prime Minister Theresa May’s plans and the court’s ruling that article 50 can’t be triggered without a parliamentary vote. While that mess will take an unknown amount of time to untangle, the city of London will remain in limbo – and so will its property market.