Prime London Lettings Report: July 2020
Uncertainty around the start of the academic year and pressure on corporate budgets means lettings activity has been lower than normal in London markets this summer
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PCL lettings index: 155.4
POL lettings index: 162.1
Rental value declines have narrowed in London markets in recent months but weaker demand means there will be no spike in activity this summer.
Average rental values in prime central London (PCL) fell 0.9% in July, which was an improvement on the 2.2% decline recorded during the depths of the market lockdown in April.
Similarly, in prime outer London (POL), a decline of 0.4% in July compared to a fall of 2.6% in April.
Although lettings markets re-opened in mid-May after the pandemic resulted in a UK-wide lockdown, supply levels remained relatively robust as more owners decided to let rather than sell. Rental values have fallen in recent months as this uptick in supply has been compounded by weaker than normal demand.
“Summer is normally the busiest time of year for the London lettings market,” said Tom Bill, head of UK residential research at Knight Frank. “This year will be different as fewer students face a hard September deadline and as companies tighten their belts until the economic fallout from the pandemic becomes clearer.”
Student demand is instead expected to rise steadily towards the end of the calendar year as more colleges and universities earmark January for a physical return to campuses.
In the 12 months to July, average rental values in prime central London declined 5.8%, while in prime outer London the decrease was 5.4%. In both cases, it was the largest annual decline registered since the global financial crisis in 2009.
The weakest-performing section of the central London market has been between £1,000 and £1,500 per week, where corporate demand is traditionally stronger. There was a fall of 4.8% over the last three months in that price bracket compared to an overall fall of 3.4%.
The south-west was the strongest performing area in outer London as it benefitted from growing demand for outdoor space. Average rental values in south-west London fell 1.4% in the three months to July compared to an overall fall of 2.3% over the same period in POL.
Demand is still rising, although the focus is on sub-£1,000 per week properties and areas with more green space.
Across London and the Home Counties, the number of new prospective tenants that registered in the week to 1 August was 56% higher than the five-year average. Meanwhile, viewings were 36% higher over the same period.