Rents in London’s prime residential market are on the rise, up 9.2 percent in the 12 months to the end of June 2010 according to the Knight Frank London Lettings Index for Q2 2010.
The improving picture for landlords continued into the second quarter of 2010, with a rise of 2.6 percent in the three months to June.
However, despite the recent upswing in the market, rents still stand 12.4 percent lower than the market peak in March 2008.
Knight Frank says demand and supply dynamics have driven the market with the number of tenants rising 5 percent and the supply of new rental stock falling by 25 percent during the past year.
Liam Bailey, head of residential research, Knight Frank said: “A combination of a slow but steady improvement in the central London jobs market over the past year, and a strong residential sales market, have conspired to create the conditions for rising rents in the prime London market.
“Improvements in hiring volumes in the business and financial services sector since last summer have seen a 5 percent rise in the number of tenants looking for accommodation over the past year, and a 17 percent rise compared to two years ago.
“With the ‘forced landlords’ from 2008 finding a very receptive sales market over the past 12 months the supply of available properties to rent has dropped by 25 percent and 64 percent compared to the level a year ago and two years ago respectively.
“The strength of the market is even more marked in central west areas, with very strong rental growth in Knightsbridge (17.1 percent growth), Notting Hill (16.6 percent) and Chelsea (14.6 percent).
“This is a reflection of the improvement in the fortunes of the ‘City’ employment sector since the nadir of early 2009 – these areas are all characterised by strong ‘City’ demand.
“Despite falling rental stocks the number of tenancies agreed has continued to rise over the past year, up 5 percent, contributing to a weakening of tenants negotiating power. The ratio of new prospective tenants to newly available rental properties rose by a third, to 4.14, in the year to June.”
