Rental Market
Summer 2017

Rental prices across the UK are moderating. The average annual rent rose by just 1.8% in the year to May, according to the Office for National Statistics, compared to a rise of 2.3% six months previously. HomeLet report that in the twelve months to June, average prices for tenancies in the UK fell by -0.2%, with average prices across London falling by -2.6%, and stretched affordability across many parts of the capital.

While the overall market slows, there are indications that the prime central market may well have turned a corner. Knight Frank note that rents fell just 0.7% on a quarterly basis in June, the lowest three-month decline since November 2015, with rents falling by 4.4% on an annual basis, the smallest decrease since August 2016. This is primarily due to lower levels of stock underpinning rental values. As demand in the sales market strengthens, the number of properties placed onto the lettings market has fallen but the suite of taxation changes is still impacting buy-to-let investment. The Council of Mortgage Lenders has revised downwards its expectation for buy-to-let lending to £35 billion in 2017 and £33 billion in 2018, rather than the £38 billion they anticipated in December 2016.

Between January and May 2017, Knight Frank report that the number of new lettings properties on the market fell by 7% compared to the same period in 2016, while registrations by new prospective tenants rose by 13%. These figures bode well for the future, as do signs that there appears to be a more conciliatory approach to the future of the financial services industry and in particular, the location of euro clearing operations. These will be welcomed by the lettings market. The firm estimate that close to 50% of tenants in prime central London come from the financial services industry so any significant movement of these workers would have a huge impact on supply and demand across all levels of the market. Across Kensington and Chelsea, the average monthly rent for the top quartile of properties is £3857 per month.