Rental values in prime central London fell in the second quarter of the year as stock levels increased while demand from tenants weakened, the latest figures show.
Presented with a wider selection of rental homes to choose from, tenants are being pickier and using the oversupply of stock to haggle over asking prices, which has led to falls in rental values in some price ranges, particularly where properties are not presented to the highest standard, according to JLL.
Neil Chegwidden, residential research director at JLL, said: “The main feature of the current market is an oversupply of stock. With weakened tenant demand, the increased supply of properties on the market is not being eroded. Available supply has also been boosted by owners electing to rent out their properties as opposed to selling them, given the diminished demand in the sales market.”
The oversupply of homes on the market has led to pressure on rents across prime central London, particularly at the upper-end of the market, with rental values falling during Q2 2016.
According to JLL, rental values fell by an average of 1.9% in Q2 compared with the previous quarter, and by 4.3% year-on-year, led by declines of up to 10% across higher rent levels.
With rents falling, rental market activity in prime central London has remained stable, with the number of transactions in the 12 months to Q1 2016 down by just 1% compared with the year to Q1 2015.
Chegwidden continued: “Sources of new demand have been limited in 2016 and this has left existing tenants in a strong bargaining position. Although most are choosing to remain in their current accommodation due to the upheaval and cost of a move, some are moving elsewhere to take advantage of these conditions.”
Despite the slowdown, activity in prime central London’s private rented market actually picked up marginally in Q2 2016 relative to Q1 with the volume of transactions increasing by 12% during this period to a similar level with Q2 2015. This was made up of a 1% decline in flat lettings and an 8% rise in house rentals.
Lucy Morton, director of Residential Agency at JLL, is feeling much more optimistic about Q3.
She said: “Whilst the first six months of 2016 were challenging for the prime central London lettings market, Q3 is more active. Along with an increase in transactions we expect the current oversupply of available properties to diminish as demand increases.
“We are seeing and letting to an influx of high net worth students and families eager to get settled before the start of the next school year. There is a marked increase in enquiries from relocation agents acting for the city corporations relocating expats into London.”