Rental values in prime central London fell in July as stock levels held up while demand from the financial services sector became more subdued against a jittery global economic backdrop.
The fall of 0.1% was the first decline since February 2014 and meant annual growth slowed to 2.9%, having peaked at 4.2% in May while prime gross yields were flat at 2.95%, according to prime central London index from Knight Frank.
It explains that stock levels have been buoyed to some extent by a restrained sales market, where an increase in stamp duty for listings worth more than about £1.1 million has dampened activity and price growth.
According to Tom Bill, head of London residential research at Knight Frank, as annual price growth has slowed to 2%, more listing owners have opted to become landlords as they wait for the market to digest a succession of recent tax changes.
He explained that this short term supply/demand imbalance means two things. First, tenants are shopping around more and securing deals has become more difficult for landlords, even after initial agreements are in place.
Second, landlords have made it more attractive for tenants to remain in place, prompting higher renewal rates. ‘While seasonal demand from students has remained strong, corporate demand has become more muted despite some pockets of stronger performance,’ he said.
The report points out that demand in the prime central London lettings market has traditionally been strong from the financial services sector but optimism among bankers fell sharply in the second quarter of 2015, according to a CBI/PWC survey.
‘Continued regulatory uncertainty means banks are scaling back spending plans and nervousness surrounds a possible UK exit from the European Union, the recent Greek crisis and Chinese stock market volatility,’ Bill said.
‘However, there are longer terms grounds for economic confidence, and the UK’s recovery was underlined by strong GDP figures in July. Furthermore, in an attempt to increase the appeal of London, Chancellor George Osborne plans to reduce the bank levy,’ he explained.
‘Meanwhile, Brevan Howard, one of world’s largest hedge funds, is reportedly moving senior traders back from Geneva to London, underlining the city’s dominance as a global financial centre,’ he added.
BOOKMARK THIS PAGE (What is this?)
Source: Property News Spain