10:59 AM, 18th February 2019, About 3 years ago
Savills have released their five year ‘Prime’ lettings forecast indicating that the London high value rental market may have bottomed out, but with continued economic uncertainty prices will only start to recover in a year to 18 months time (Prime lettings are defined by Savills as starting at a rental income of £500 per week). Click here to view the full report.
Statistics from Savill’s index show rents have fallen by an average 9.6% across the capital’s prime markets since the 2016 Brexit referendum, but falls decreased to 0.8% last year.
Savills forecasts that rents will rise by an average of 11.5% over the next five years, and by 12.6% across the prime commuter zone.
London falls have been concentrated in the higher value prime central postcodes with rents dropping by 16.5% since 2016 and 3.2% in the past year. Rents in lower value outer prime London markets have fallen an average 6.4% in total in the same period, but stabilised with an increase of 0.2% in 2018.
Lucian Cook, Savills head of residential research, said: “We are seeing footloose, cost conscious tenants drawn to prime areas that offer greater value, rather than confining their search to premium addresses, and there’s a deeper seam of demand for smaller properties driven by needs-based younger tenants.”
“But that doesn’t mean we can anticipate falling rental supply. Instead, we expect cash investors to become increasingly dominant, especially in central London, while history suggests international investors will become more active as uncertainty clears, particularly if they can play the currency card. Stock levels also look set to rise as the number of new build homes completing increases.”
“The ability to deliver recovery in rental values over the next five years depends partly on what Brexit ultimately means for London’s high value employment markets. But, given the pipeline of prime new build homes that could come to the rentals market, we expect that supply will remain as important a determinant of rental values as Brexit. The next five years should see the post Brexit falls in rents reversed.”
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