London rents to increase by 3%

LONDON: London's residential sector will see rental rates increase by 3% this year, forecasts property consultant Cluttons in a report released on Wednesday, Feb 9.

"This year's growth will have a positive impact on yields during a year when capital value growth will be at 2.5%," said Andrew Stanford, head of residential consultancy divisions at Cluttons.

Stanford acknowledged that the UK market will be driven by foreign investors. "With China raising interest rates, the UK may offer even greater value for Chinese investors over the coming months," said Stanford.

Cluttons research did indicate that in the letting market existing and potential tenants are cautious with their budgets but demand is still strong. "The West End residential villages have seen particularly strong growth in demand and the market balance remains in favour of landlords," Stanford said.

Relocating agents have returned with more overseas job-starters entering the market from USA, Russia and the Middle East. As their relocation budgets are low, clients are less fussy where they are staying.

The report noted that current tenants are seeking to avoid the open market and are putting up with slight increases in rents. "However, there is considerable resistance amongst tenants for increases in excess of 5% in most locations," commented Stanford.