With residential property prices in super prime London continuing to fall, an increasing number of would-be purchasers are turning to luxury rentals, reflected by greater activity in the capital’s super prime market, where tenants are prepared to pay as much as £18,000 per week for a home, according to a new report from Knight Frank.
Fresh data provided by the upmarket estate agent shows that the number of its super-prime lettings increased by 34% last year to 137, from 102 in 2016, with most of the properties let furnished.
Brits and Americans each accounted for a fifth of tenancies, followed by Russians, the French and Chinese.
With house prices falling in parts of the capital, a growing number of wealthy people are choosing to rent, partly to avoid hefty tax bills.
“The momentum of recent years is still gathering pace,” said Tom Smith, Knight Frank’s head of super-prime lettings. “Demand is resilient due to higher rates of stamp duty and the associated uncertainty over the short-term prospects for price growth in the sales market. A lack of clarity regarding Brexit has also been a factor.”
As well as more transactions, the deals agreed are now on a longer-term basis. The average length of a tenancy in 2017 was 589 days, which compared to 548 in 2016 and 528 in 2015, an analysis of Knight Frank data shows.
There was also a record number of £15,000- plus per week deals last year, with 20 recorded compared to 11 in 2016.
Smith added: “There is increasingly the opportunity to rent the sort of high-quality stock that has come from the sales market that historically did not exist on the lettings market.”
“The clear message for landlords is that super prime tenants will not compromise on quality in the same way as buyers will not.”
Knight Frank also report that the prime central London sales market is now moving towards recovery.
Average prices above £10m rose 0.2% in the year to January 2018, the first annual increase in almost two years.
In a sign that more tenants are anticipating this recovery, there has been an increase in the number who have requested a clause in the tenancy agreement giving them first refusal to buy at the end of the tenancy.
“This option was rarely mentioned a few years ago but is now a frequent topic of conversation on viewings. Many landlords have nothing to lose with this ‘try-before-you-buy’ route,” said Smith. “The worst case scenario is that you have an income stream that covers your costs and the best is that you also have a sale at the other end.”