Supply has exceeded demand across much of the prime London rental market in recent times, placing sustained pressure on prices. However, evidence suggests this situation is beginning to change. Data from LonRes indicates that the supply of new instructions to prime central London fell by over 11% in the first quarter of 2018 compared to a year earlier, while Knight Frank report that average rental values across prime central London fell by just 1.5% in the year to March, the most moderate rate of decline in almost two years. The agency report average rents increased 0.2% between February and March, the first positive movement since
September 2015. Across London as a whole, rental growth was just 0.1% in the year to March, unchanged for the third consecutive month according to the ONS.
Rental supply rose dramatically in 2016 and early 2017 thanks to a combination of factors, including the rush to buy pre the introduction of the 3% additional stamp duty levy on second homes, and the uncertainty of the sales market in the aftermath of the Brexit vote. This situation is now reversing, as pricing in the sales market shows more signs of stability, while tax changes for landlords have curbed new buy-to-let activity. The
Council of Mortgage Lenders reports there were just 74,900 loans issued for new buy-to-let property purchases across the UK in 2017, down 26.6% on 2016 when the figure was over 100,000.
Meanwhile, tenant demand continues to grow. Knight Frank report that the number of new prospective tenants registered across prime central London in the year to February was 16% higher than during the previous 12 month period, while viewings rose 14% over the same period. If demand exceeds available supply there will be upward pressure on prices.
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