Market in Minutes Prime London Rental Markets

Savills World Research
UK Residential
Market in Minutes
Prime London
Rental Markets
Q1 2015
SUMMARY
Rental values in prime London market 2.2% higher than this time last year
■ The East of City markets saw the
strongest rental growth over the past
year across all of prime London with
rents increasing by an average of 6.5%.
■ Searching for value has become
key for a growing pool of tenants with
many moving from more expensive
neighbouring boroughs.
■ Looking forward, the demand
for prime rental property over the
medium term will be underpinned
by the strengthening London
economy and the continued
expansion of sectors such as
technology and telecommunications.
Table 1
Prime Rental Movements to Q1 2015
All
London
Central
London
North
West
London
South
West
London
North
London
East
of City
Q on Q
0.6%
0.3%
-0.2%
0.9%
0.7%
2.5%
Y on Y
2.2%
2.7%
1.0%
2.3%
3.3%
6.5%
5 Year
12.3%
13.4%
1.4%
15.6%
16.6%
27.4%
£42
£61
£43
£29
£36
£35
£ per sq ft
Source: Savills Research
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Market in Minutes | Prime London Rental Markets
Rental values in the prime London
market are 2.2% higher than where
they were this time last year. This is the
strongest annual growth since the year
to September 2011.
The highest rental growth over the
past year has been in the East of City
market, which consists of Canary
Wharf and Wapping. Strong demand
for smaller properties has come from
relocators and young professionals
attracted to the one and two bed
stock available. The apartment
market of Islington, which attracts
a somewhat similar tenant profile to
the East of City, has also seen strong
annual growth
The more domestic market in South
West London, which stretches
from Battersea to Richmond and
Wimbledon to Fulham is continuing to
attract a wide tenant profile including
families, corporate relocators and
sharers. A wider range of affluent
families, who have become more
flexible in choosing an area in which to
rent, have been increasingly attracted
to these areas, given that the average
rent per sq ft is less than half of that in
central London.
Moving within London
Both of these areas continue to witness
demand from those unable or unwilling
to buy. These applicants are attracted
to the easy access to the City and,
increasingly, the emerging tech centres
north and east of the square mile.
Against the backdrop of a subdued
pre-election sales market, rents in
prime central London, have continued
to rise modestly, bringing annual rental
growth to 2.7%. Within this market,
houses have seen stronger annual
growth than flats, with rents rising
4.4% and 1.7% respectively. This
reflects higher volume of smaller new
build stock coming on to the market
from foreign investor landlords.
Q1 2015
This reflects the fact that searching for
value has become key for a growing
pool of tenants in the prime London
rental market. Our data shows that a
large number of tenants are moving
between boroughs, with a high
proportion of those renting in South
West London moving from more
expensive neighbouring locations.
For example over the past two
years, 56% of new lettings agreed
in Hammersmith & Fulham were to
tenants moving from outside of the
borough, with the highest percentage
coming from Kensington & Chelsea.
Furthermore, 56% of new tenancies
agreed in Wandsworth were to those
moving from Hammersmith & Fulham,
reflecting a flow of tenant demand
along the wealth corridors, that has
begun to replicate the sales market. n
2.7%
Annual rental growth in
prime central London
Outlook
Looking forward, the strengthening London economy
and the continued expansion of sectors such as
technology and telecommunications will underpin
demand for prime rental property over the medium
term though demand from the financial and business
services sector is forecast to be more subdued.
On the supply side, a more muted sales market in the
run up to the election will mean that those looking to
buy remain in rental accommodation for a little longer,
though this is likely to be offset by more stock being
bought to the rental market by accidental landlords.
In the short term this is likely to continue to suppress
rental growth. In certain locations on the fringes
of prime London, where high levels of new build
stock have been bought by overseas investors, we
expect the extent of new supply to cause longer term
downward pressure on rents.
Nonetheless, across the prime London markets as a
whole we expect rents to rise by 17% over the course
of the next five years, unless a mansion tax were to
be levied by a new government post-election.
Savills team
Residential Research
Lucian Cook
UK Residential
020 7016 3837
[email protected]
Sophie Chick
UK Residential
020 7016 3786
[email protected]
Kirsty Lemond
UK Residential
020 7016 3836
[email protected]
Lettings
Jane Cronwright-Brown
Head of Lettings
020 7578 9980
jcronwrightbrown
@savills.com
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