Signs of recovery for the capital’s lettings market

Property prices in the UK were flat in November, latest RICS survey shows
December 14, 2017
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Signs of recovery for the capital’s lettings market

UK Supported Housing Property Bonds

Despite the political ambiguity surrounding Brexit, demand for rental properties in London was on the rise in the third quarter of this year, according to the latest London Lettings Report by Foxtons.

A detailed look at the market also revealed an increase in the number of tenants registered per new property instructed – from 7.7 to 9.2 – compared to the same quarter last year. At the same time a decrease in stock levels has become evident.

Sarah Tonkinson, Director of Institutional PRS and Build to Rent at Foxtons, had this to say: “Q3 is known as ‘the lettings quarter’ of the year as a number of existing tenancies come to an end and there is a natural increase in activity from students and corporate tenants. This year was no exception.”

The oversupply of properties, created in part by a surge in the number of buy-to-let property purchases in advance of Stamp Duty changes in April 2016, has now been absorbed by the market. After benefiting from a softening in prices as a result of that oversupply, tenants opted for longer-term contracts, and this has helped stabilise the supply-demand balance further.”

The tenant demographic in the capital remains varied. A 6% decrease in Western European tenants and a 3% decrease in tenants from the rest of Europe were balanced out by a significant 8% increase in tenants from Asia and the Middle East, compared to the same quarter last year.

While average rents have fallen slightly in Zone 1 and Zones 3-6 compared to Q3 2016, Zone 2 demonstrated more encouraging results with a small increase in rental prices. A slowdown in the rate of capital growth over the year to date has affected total returns on residential properties, bringing it to 8.3%. Total annual returns, however, remained healthy, particularly when assessing long-term performance.

Sarah added: “London continues to retain its status as one of the most attractive cities in the world, and despite the ongoing uncertainty surrounding political affairs, property remains a strong investment choice.”