Estate agent Savills says luxury rental prices in the heart of the capital are ‘bouncing back.’
The Guardian reported that: “The super-rich are paying 13.5% more to rent luxurious central London properties than last summer, research has found, in the latest sign that overseas millionaires and billionaires are flocking back to the capital.
“The estate agent Savills calculated that over the year to June 2022 the average price of ‘prime central London’ rentals rose by that figure, the highest annual increase in more than 20 years.”
An “acute lack of stock” is driving price rises
Jessica Tomlinson, a research analyst at Savills, said the price rise had been driven by an “acute lack of stock” and jump in demand from tenants “in response to the capital bouncing back to life”.
“Prime rental values in London have been steadily recovering from Covid-19 related falls since the beginning of the year,” Tomlinson said. “In the three months to June, rental values increased by a further 3.3%, bringing annual growth to 13.5% – the highest annual increase recorded in over 20 years – which has more than compensated for the losses seen during the pandemic.”
The sales and rental markets tell “widely contrasting” stories
Letting Agent today quoted LonRes managing director, Anthony Payne, who says the sales and rentals market for the prime segments of the capital tell widely contrasting stories.
He comments: “[For sales] on the face of it there is a lot to be downbeat about. And yet beyond the backdrop of a cost of living crisis, rising interest rates and a global economic slowdown, London’s prime housing market continues to hold its own. People still want to move home and buying agent’s report demand from prime London purchasers to be higher than ever.
“The top-end of the market (above £5m+) continues to be buoyant and houses remain the preferred choice. That said flats – particularly those with no outside space – are still struggling to find buyers and their asking prices reflect this.
“It seems as though purchasers have not been put off by rising interest rates. And anecdotally we hear purchasers have factored these in and are buying with their eyes wide open.
“London’s prime rental market is however a completely different story. We have long reported a shortage of stock at a time when demand is on the rise. With no sign of increased stock levels and tenant renewals on the up, it is difficult to know how this particular deadlock is to be resolved.”
Advantage’s view: While the under-supply of houses available to buy has dominated the headlines in recent years, property experts are increasingly highlighting the (sometimes more acute) shortage of rental properties in prime locations, which is driving up prices at record rates in some areas. As house price growth softens, we may be about to read a little less about rocketing house prices and a little more about would-be tenants competing to secure rental properties in the most in-demand postcodes.