Prime London tenants may be in a position to buy their own homes in the near future, according to analysis by estate agent Knight Frank.
In the firm’s latest Prime London Lettings Index, covering February 2019, it found that the number of prime London tenants entering tenancy agreements has plateaued since the middle of last year, indicating that some renters may be willing to buy soon.
In prime central London, the average rent price rose by 1.4% in the year to February, compared to just 0.2% in prime outer London. On a quarterly basis, rents dropped by an average of 0.4% in both prime central and prime outer London.
Knight Frank observes that this positive growth in prime outer London rents in the 12 months to February marked the first increase for the area in three years. It believes that the tax changes introduced for landlords in recent years have put downward pressure on supply levels across the prime markets of London.
However, the ratio of new prospective tenants versus new supply in prime central and prime outer London rose to 5.4 in January. This increase – largely due to seasonal growth in new potential renters – indicates continued upward pressure on rent prices.
As the number of new rental property listings has decreased, so has the amount of tenancies agreed in prime central London. 16.5% fewer tenancies were agreed in the year to January than the previous 12-month period, data from estate agent LonRes shows.
The number of new prospective prime London tenants paying over £5,000 per week for their rental properties has plateaued since the middle of 2018, suggesting that demand will shift towards the sales market in higher price brackets of the capital.
Knight Frank has found that the year-on-year change in the total number of £10m+ sales applicants was broadly flat in the first two months of this year, after two years of declines.