■ Despite falling rents, the market has remained active. This activity has been from needs-based tenants at the lower end of the market, fuelling demand for smaller properties, as well as from super-prime tenants at the top end and affluent students.
■ Rents in the prime rental markets outside London have also fallen by 1.5% over the last year, but their longer-term growth has remained stronger than the capital. Properties that remain popular are those of the highest condition in the most convenient locations.
■ Schools remain an important source of appeal for larger family properties – international tenants choosing markets located close to the best international schools. As our exit from the EU unfolds, we expect to see more demand from relocators within the diplomatic community moving with their families.
■ Completing stock from the new build pipeline is likely to suppress rental growth in the capital in the mid-term. We expect confidence to return to the market once we have a better understanding of our future relationship with the EU.
Prime London rental market is active
Prime London rents continued to soften over the last three months of 2017, leaving them 3.1% down over the year. A high level of supply has continued to hold back rents, with tenants remaining cost conscious in the current economic climate.
But, while rents are sliding, they are doing so at a slower pace. This suggests that the imbalance between supply and demand has eased a little.
The high levels of stock brought to the market in the immediate aftermath of the stamp duty surcharge of April 2016 appear to have worked through the market. However, increased new build volumes and, to a lesser extent property brought to the rental market by those struggling to sell, provide tenants with significant choice.
Despite falling rents, the market remains active. This is especially true at the lower end of the prime market, where demand has been propped up by more needs-based renters.
At the upper end of the market, demand has been supported by those choosing to rent rather than buy, given the high costs of stamp duty and the underlying political and economic uncertainty.