Knight Frank Prime London Rental Index – June 2009 results
01 July 2009
· Residential rents have fallen for the fifth quarterly period, with a decline of 1.9% in June 2009
· On an annual basis rents are now 19.3% lower than in June 2008
· Stock levels are still strong and are 83% higher than a year earlier
· Rents on sub-£500 per week properties are the best performers - falling only 11.3% over the past 12 months, the worst hit have been the top of the market £1,500+ per week sector - where rents have fallen by over 27%
· All areas of central London have been hit - with the City the least affected, rents here have fallen only 9.7% over the past 12 months
· There is early evidence that the rate of lets is outpacing the volume of new stock coming on the market - meaning that downward pressure on rents is likely to reduce over the summer
Liam Bailey, head of Knight Frank residential research, comments: -
“The fall in central London rents has continued into the summer - the Knight Frank Prime Rental Index reveals that for the three month period to the end of June 2009 - rents fell by 1.9% on average. On an annual basis rents are now 19.3% lower than they were in June 2008.
“Falling rents have resulted from a dramatic growth in the volume of available stock - as homeowners decided to keep surplus property rather than sell into a difficult market over the past 12 months. While the volume of tenancies agreed have risen by anything between 15% and 30% across central London - stock levels in some cases have risen by 100% to 200%.
“Once again it has been the more expensive properties which have borne the brunt of the rental falls - with rents on properties costing up to £500 per week falling only 11.3% over the past year, and those costing over £1,500 per week falling by 27.3% over the same period.
“Most central London sub-markets have been hit by rental falls - with Chelsea and Kensington being particularly hit with rental falls of over 26% in each area. Only the City - with a rental decline of only 9.7% over the past year - has been partially protected from the downturn. The City benefits from a high proportion of lower priced properties - which as we saw above - have been better performers during the downturn.
“Indications at the current time are that the sharp growth of stock volumes - which presaged this downturn - is reducing. Properties have been letting faster than they have been replaced since early May - and this is helping to reduced void periods. The summer is likely to be characterised by continuing tough negotiations for landlords - but significant rental reductions from here are unlikely. The traditional busy September market could see the beginning of rental increases in some areas – as demand from new employees and their families comes into the market.”