1st Aug 2017 LonRes* Lettings market overview – Summer 2017.

For the third consecutive quarter, the number of new lets agreed across prime areas of London increased compared with the same period a year earlier.

After the first quarter, when achieved rents fell across prime central London, the second quarter saw an improvement in market conditions. The number of properties let across prime central London rose 9% in the second quarter compared with the same three months last year. Over the same period, the number of properties on the market fell, down 11% at the start of July, compared with the same point last year. This meant less choice for tenants but left landlords in a stronger position.

A more balanced market in prime central London is supporting increases in achieved rents. The LonRes Lettings Index recorded a 1.4% quarterly rise in rental values in the second quarter. Annually this still leaves prime central London 4.9% down on the second quarter last year, but is an improvement on the annual fall of 8.2% recorded in the first quarter. Average discounts also fell over the last three months, reflecting improved market conditions and landlords becoming more realistic in their expectations on rents. Tenants in the second quarter negotiated an average of 9.3% off initial asking rents, compared with 10.7% in the first three months of the year.

Outside prime central London

At the end of the first quarter, both prime London and prime fringe had seen a significant increase in volumes of stock on the market, up 25% compared with the same point a year earlier. Three months on, at the end of the second quarter, both markets recorded more modest increases in stock. The number of properties available up 6% in prime London and 14% in prime fringe compared with the end of the second quarter last year. Rents in prime London and prime fringe also recorded small quarterly falls of 0.8% and 0.2% respectively, down between 3.4% and 6% on the second quarter last year. Both areas saw an increase in properties let, albeit more modest than prime central London over the same period. Prime London recording a 3.4% annual increase in properties let in the second quarter with prime fringe up 0.1%.

Looking ahead

In the latest LonRes survey, 64% of agents surveyed still expect achieved rental values to be lower this time next year. However, following improved market conditions across prime central London in the last three months, our agents were less likely to forecast more significant rental falls over the next 12 months. The number of respondents expecting falls of more than 5% falling from 21% three months ago to 14% this quarter.

(*LonRes is an exclusive subscriber network strictly limited to known and established property professionals and the definitive source of property data for central London).

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