Rental values in prime London increased by 1.9% in the fourth quarter of 2018 on the back of greater demand from tenants, as continued political uncertainty pushed would-be tenants into the prime rental market, new figures show.
The latest LonRes Prime London Lettings Index reveals that rents rose owed in part to a supply-demand imbalance in the market, with 80% of respondents to the LonRes Agent Survey reporting an undersupply of studios and one-bedroom flats in their area.
Over 2018, 13% fewer properties reached the market.
But it is worth pointing out that prime central London saw a slight year-on-year decline in rental values, down 1% compared to Q4 2017.
Many landlords remain cautious and are not increasing rents for existing tenants, according to the report.
In Q4 2018, 72% of letting agents surveyed said that most of their landlords were not upping rents on renewal.
As for new tenancies, tenants negotiated an average of 4.9% off initial asking rents over Q4 2018, down from 6.4% a year earlier.
Meanwhile, 31% of properties over Q4 2018 underwent a price reduction before securing a tenant – compared to 41% in Q4 2017.
A combination of fewer homes to rent reaching the market and increased demand suggests that rents in prime London will rise in the near term.
Some 58% of respondents to the LonRes Agent Survey reported an increase in tenants who were previously looking to buy. Just 8% reported a fall.
An increase in renewals resulted in fewer new lets agreed in Q4 2018 - down 17% on Q4 2017. The falls were greater in the second half of last year with an 11% reduction in new lets compared to 2% in H1 2018.
With fewer properties available to rent, the time taken to find a new tenant has fallen. In Q4 2018, 30% of properties let in prime London had a new tenant within a month of being listed, up from 23% in Q1 2018 and the highest for four years.
Marcus Dixon, head of research at LonRes, said: “In an uncertain market the response by both buyers and sellers in prime London has been to hunker down and observe rather than participate. This is impacting on both transaction levels and prices. However for those willing to buy, there are opportunities to be had and purchasers are negotiating accordingly.
“The prime rental market continues to benefit as would-be buyers become tenants. Despite fewer new lets agreed, owing to an increase in renewals, stock levels are low and competition among prospective tenants is leading to increases in achieved rents in most central London areas. Fewer landlords are needing to reduce their asking prices and discounts have fallen back.”