China lies behind declining rental market in prime London

Rental value growth in prime London postcodes declined further in August as supply built and demand cooled. 

That’s the view of high end agency Knight Frank which says stock is building as more owners are opting to let out their property due to the weakness in the sales market caused by rising mortgage rates. 

Meanwhile, demand for rental property in prime London dipped over the summer for reasons that include the lower number of Chinese students choosing to attend university in the UK.

As a result, average rental value growth in prime central London fell to 12.4 per cent in the year to August, which was the lowest level since September 2021. In prime outer London (POL) the figure was 11.5 per cent, the weakest it has been since October 2021.

While the strong rental value growth of recent years has calmed down, it’s still high by historical standards. 

To put last year’s growth into perspective in PCL, average rents grew by 15.6 per cent in the 10 years leading up to the pandemic. In POL, the annual growth rate in August exceeded the rise of 11 per cent seen during the decade prior to the pandemic.

The number of new lettings listing in the capital was 13 per cent below the five-year average (excluding 2020) in August, Rightmove data shows. That compares to a decline which was closer to a third during most of last year. 

Meanwhile, the number of new lettings applicants was equal to the five-year average, after spending most of 2022 more than 50 per cent higher, as the chart shows.

One of the reasons is that the number of Chinese students has dipped this year. UK universities may have reached ‘peak China’  according to the head of the Universities and Colleges Admissions Service, for reasons that include recent visa and tax changes. 

“Inquiry levels are strong but not as high as we’ve seen over the last two summers” says David Mumby, head of prime central London lettings at Knight Frank. “As supply increases, the frenetic rush for stock we have seen in previous years has calmed down.”

And John Humphris, head of corporate and relocation services at Knight Frank, comments: “Demand levels this summer season from both Corporate relocators and international students has been more steady and consistent and less hectic than previous years, and as a result we anticipate a strong autumn market with demand delayed yet to come through the system”

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