Why renting in Central London is back on the agenda
Two years on from the world being ground to a halt by the pandemic has seen many markets only beginning to return to their norms in recent times. Consumer confidence hasn’t been as quick to return as it was to disappear but there are plenty of shoots of recovery to give industry leaders around the world encouragement.
With property prices rising across the board, the market is growing at a steady rate, indicating that people are more than willing to put money into property. Although property sales in general have outperformed many market predictions when the pandemic first hit, London saw people staying away.
The opportunity to stay closer to family and avoid long commutes (by taking advantage of remote working) resulted in an unprecedented lull in the population. People have started flocking back to the city now and the rental property market looks set to mirror that.
The Central London rental market may host luxury homes but finding renters to fill them was a struggle and it was lagging behind the rest of the country. Thanks to a general rise in demand for rentals (as office workers and students flocked back to the city), the amount of rental stock in central London dropped dramatically in January 2022. But, after this comparatively slow start, tenant demand and values are now returning to pre-pandemic levels especially in peripheral parts of the capital while luxury rentals are very much back on the agenda.
Luxury viewings on the increase
Viewings for residential properties right at the heart of London have risen as much as 70% in the months since June 2021, according to a report by boutique agents, Rokstone. In addition to the viewings increasing, the number of prospective tenants is also rising, up 30% since June 2021.
All of this is positive and suggests that the demand for families to be back in the heat of the action in London has returned. This comes on the back of a troubled period for Central London landlords who saw luxury rental deals drop by as much as 30%.
Supply versus demand
There is certainly plenty to get excited about if you are a landlord of a prestigious property in Central London. Demand is increasing but there is a limited supply of luxurious homes, which is driving the rental prices up.
The rental prices in the area rose by 1% but inventory was down a colossal 40%. Families in search of Central London rental properties are going to be elbowing each other out of the way to get the homes they desire. Prime London real estate is being let for £2,500 per week and above while super-prime rental properties have soared to over £5,000 per week.
The areas seeing the fiercest competition for rental accommodation are Marylebone, Belgravia, Notting Hill, Chelsea and Mayfair. All of these areas are perfectly placed in the epicentre of the capital. Buildington reports that popular lettings have seen 12-18 applicants per property while those deemed to be the best on the market receive up to 24 applicants.
Properties aren’t left without tenants for long and landlords have found their homes being snapped up within a matter of several weeks. Given the exclusivity of these properties, it’s clear renters are moving quickly to ensure they get what they want.
What are the popular properties?
Five and six-bedroom properties cover a huge portion of the Central London rental market, suggesting that it’s primarily families looking to move into the area. But, with the average weekly rental price of £4,536 for five-bedroom and £11,250 for six-bedroom homes, they don’t come cheap.
As for property types, turn-key houses, often fully dressed, are proving popular with renters especially if there is outdoor space included. In the past, outdoor space might not have been important for renters or buyers in London but with people working from home more, it’s now deemed essential.
Other rental properties that enjoyed an increase in demand from mid-2021 included spacious apartments with balconies or terraces; once again highlighting the need for an outdoor retreat. The main requests for renters looking for luxury London property are brand new or recent refurbishments, parking and a concierge service.
Future market trends
In its analysis of the luxury rental market in Central London, Rokstone predicts that property values will continue to rise, estimated to be around the 2-3% mark. The boutique estate agency also predicts that viewing volumes will increase by 60% in 2022 and the volume of deals is likely to increase by 10-20%.
However, the volume will only go up if the supply comes into the market so it may be slower than predicted depending on those movements. This is all likely to be music to the ears of landlords in Central London as they see potential tenants falling over themselves to get into their properties.
Is now a good time to buy in Central London?
It would appear that the Central London rental market is set to be healthy throughout 2022 but what about the buyers’ market? Given the exclusivity of the luxury properties, it’s not a surprise that properties to buy in Central London are just as scarce as those to rent.
Buyers were instead looking to find homes in the countryside or by the beach as they hoped for more space and a healthy supply of fresh air. However, attention has since returned to the capital and according to a report by Savills, a 23.9% growth in London luxury property prices is expected in the next five years. It’s going to be a case of acting quickly for buyers to avoid paying inflated prices in the coming years.