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Rents fall in London despite greater demand from tenants

Average rents continued to fall across many parts of London during the second quarter of the year despite the fact that demand for rental property rose further, according to Foxtons.

But while rents continued to fall, the company’s London lettings report for Q2 2017 suggests that the market in the capital is starting to see ‘green shoots’, owed largely to the fact that greater demand from tenants is helping to slow the pace of decline in rents.

Growing signs of the start of the long-awaited stabilisation in the rental market was evident in Zone 1, where there were more central London searches in the second quarter of the year than in the first, while Zone 2 maintained the highest level of demand.


Domestic renters continued to comprise the largest proportion of all London tenants at 39%, while the proportion of renters from Asia and the Middle East saw growth of 3.9% to 13.1% in the second quarter.

“We've spoken before about how the lettings market traditionally benefits from uncertainty in the sales market, as potential buyers turn to the flexibility offered by renting,” said Ed Phillips, Foxtons’ managing director of letting.

He added: “With the sales market in the capital still a long way from returning to consistently strong growth, an increasing number of Londoners are indeed being drawn to the rental sector. This is demonstrated by a 3.3% increase in the average number of renters registered with Foxtons for every new property instructed in Q2 2017. While this might not appear to be a significant increase, it comes against a backdrop of decline, suggesting that green shoots are starting to appear.”

The findings from the report also revealed a decrease in total annual returns on rental properties to an average of just under 10%, which despite the downward trend, continued to represent a solid and strong investment choice.

The most significant fall in rents in the second quarter was seen in Zones 3-6, with Zone 2 demonstrating the highest premium on furnished properties at 21.9%.

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