LONDON: Prime central London experienced a decline in rental rates, while the price growth of properties slowed in the past month, according to Knight Frank’s global head of residential research Liam Bailey, in presenting the Prime Central London Rental Index report and Prime Central London Sales Index report.
The Rental Index showed that across the area rents fell by 0.5% month-on-month in October, continuing a period of lacklustre rental growth since end-2011. Rents have been falling or unchanged for 18 consecutive months. The decline in rental prices so far this year stands at 1.7%.
“Despite rents falling in October, the number of new tenants moving into prime rented accommodation in London in the two months to October was at its highest level ever, indicating strong demand,” said Bailey.
The number of new applicants registering their interest in the prime central London letting market was 10.1% higher in the first 10 months of 2013 than in the same period last year. Property viewings by prospective tenants were also up in the same period by 9.3%.
The Rental Index attributes the increase in demand to the growth of the technology, media and telecom industry, and the legal profession in London, as well as their increasing workforce who seek tenancies in the city.
“In terms of rental movements by price band we can confirm that the £500 (RM2,570) to £1,500 per week price bracket saw a 1% decline in October compared with the previous month, and a decline of 2.6% year-to-date,” Bailey said.
“In comparison properties in the £1,500 over per week bracket fell by 0.3% in October and have fallen by 1.2% in 2013 to date.”
While rentals are falling in prime central London, the performance is varied across markets.
“In Mayfair, Hyde Park and Notting Hill rents have declined by 6%, 3% and 2.4% respectively year-to-date. Rents in the city, however, are unchanged in 2013 and in Marylebone rents have risen by 2.2% so far in 2013,” Bailey said.
On the flipside, while rents have dropped, they are still 22% higher than in the second half of 2009.
Overall, Knight Frank has a positive outlook for the rental growth in 2014 and 2015, thanks to the improving economic and employment picture, and rising economic sentiment in London.
While rents drop, the Sales Index reveals that despite another month of price rises for prime central London residential property, there are indications that price rises for the capital’s best homes are slowing.
Property prices increased by 0.6% in October and increased by 6.2% in the first 10 months of 2013, according to Bailey.
“October’s monthly increase means that London’s best homes have increased in value month-on-month for three consecutive years.
“However, in spite of new record prices we are seeing a moderation in price growth across prime central London following very strong performance over recent years.
“Annual growth, which currently stands at 6.8%, compares with 10.1% in the 12 months to October 2012 and 12.5% in the year to end-October 2011. There are signs that buyers in certain prime central London markets are becoming more resistant to ongoing price growth,” he said.
The biggest increase in property prices in October came from City Fringe, Islington and Marylebone at 3.5%, 1.7% and 1.5% respectively.
“While the general trend was for prices to increase, in two of the markets tracked by our index average, prices fell on a monthly basis,” Bailey said. “In Hyde Park, prime property values declined by 0.3%, while along the South Bank the monthly fall in values was 1.4%. In Belgravia, Chelsea, Kensington and St John’s Wood, prices remain unchanged since September.”
According to Bailey, much of the demand is targeted at the sub-£2 million market. Sales of the sub-£2 million properties are 7.6% higher in 2013 to date compared with the same period in 2012, while prices of sub-£2 million homes rose by 9.1% in the first 10 months of 2013.
Homes values between £5 million and £10 million, and over £10 million have increased by 3.8% and 2% in 2013 to date.
“The higher stamp duty charge for over £2 million properties, introduced in last year’s budget, remains a key driver behind the stronger growth in the sub-£2 million market, but the higher transactions at this level mean stock levels for the sub-£2 million properties have fallen and are 21.6% lower in October 2013 than in the same month in 2012,” said Bailey. — by Syuhida Silmi
This article first appeared in The Edge Financial Daily, on November 15, 2013.
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