With tenants paying an average of £64 a month more than they were last year to rent property in the capital, investors have moved swiftly to cater for growing rental demand, particularly in central London.
With more tenants competing for properties to rent in Fitzrovia, Mayfair, Marylebone, St John’s Wood, among other highly desirable areas, rents in London have increased significantly over the past year.
The LSL Property Services’ monthly Buy-to-let index found that while average rents across England and Wales dipped by 0.1 per cent in February, reaching £731 a month, rates in the capital rose by 0.5 per cent to£1,092, from £1,086 in January.
The increase contrasts with a 0.2 per cent fall in rents last month and means rents in the capital have risen by an impressive 6.2 per cent annually, equivalent to £64 and well above the national average of 3.3 per cent.
David Newnes, Director of LSL Property Services, said: "While a modest increase in supply has had an effect, in the longer-term, the supply of rental homes will have to increase considerably to prevent monthly rent rises when the rental market re-enters its traditional peak season."
The hike in rental prices means that any decent houses or apartments for sale in central London are generally snapped up swiftly by property investors, particularly those specialising in acquiring buy-to-let units.
Rental demand for property in central London is being driven primarily by young professionals who prefer to rent as a lifestyle choice, while others simply cannot afford to get a foot on the housing ladder. Many former homeowners have also become renters since the housing collapse. They either want no part of owning or are forced into rental accommodation because they cannot qualify for mortgages.
AndrewEllinas, Director at Sandfords, commented: "Property economists are also bullish on the private rented sector, pointing to the latest census figures that show the rising generation is moving to city centres to live. They cannot afford to buy and are increasingly deciding to rent long-term."
While the cost of homeownership beats renting, investor demand for apartments and houses for sale in central London is driving up home prices.
Property prices are also being pushed higher by a lack of supply in relation to high demand, owed in part to stringent planning controls and the lack of land for residential development in central London.
Over the past five years the London property market has outperformed the national average, with property prices in the capital having risen by six per cent over the period compared with a decline of 11 per cent nationwide, according to the estate agents Knight Frank.
Capital gains in central London have been much higher: According to Knight Frank, property prices in London’s most expensive residential boroughs have soared over the past five years. Home prices in Kensington & Chelsea, for instance, have appreciated by 37 per cent over the past five years. The company points out that prices in such prime areas now show a closer correlation to prime regions in global cites such as New York or Hong Kong than to prices in Manchester, say.
Central London property prices are ultimately being pushed higher by greater demand from homebuyers, particularly international property purchasers who make up a significant share of all buyers.
Lindsay Cuthill of Savills told the press: "It is the strength of demand from overseas buyers that has driven up prices in central London boroughs and underpin this market."
It may not yet be full steam ahead for the national housing market, but the London property market continues to go from strength to strength; it truly is in a league of its own.
