Rental Market
Winter 2019

Growth in rental values across the UK has remained stable throughout 2018, with annual changes consistently between 0.9% and 1.1% according to the IPHRP produced by the Office for National Statistics. In contrast the London market has proved more volatile, rents falling on an annual basis through the middle part of the year, with a 0.2% rise in the year to December, the first positive month for annual rental price growth since March 2018. Across prime central London, Knight Frank report an annual rental rise of 1.1% in December, with respondents to the latest RICS Survey anticipating rents to remain stable over the next quarter.

Lettings activity has remained resilient throughout 2018 and demand continues to remain robust. Knight Frank assert the number of new tenancies agreed in November 2018 was 12.3% higher than in November 2017, while the number of new prospective tenants rose by 2%. Supply levels however have fallen back over the course of the year, with 6% fewer instructions across prime central London between January to November 2018 compared to a year earlier (LonRes). The mid-to upper market has proved most resilient, with an increase in both new instructions and lets agreed of properties priced £2500-£3500 per week and £3500-£5000 per week. The final quarter of 2018 has also seen several prime lets (+£5000 per week) agreed, such lets accounting for 2.5% of all rental activity in the final quarter, up from just 0.9% during Quarter One.

A shortage of supply has maintained pressure on prices. Properties rented on average for 94% of their initial asking price during the final quarter of 2018, up from 90% during the first quarter of 2017 (LonRes). As rents have remained stable while sales prices have fallen, Knight Frank report that average gross yields in prime central London have risen. The average yield of 3.35% in December is the highest since April 2012, which they compare to a yield on a 10-year government bond of less than 1.3% in early December.