London Rents Driven Sky High By Overseas Tenants?

Savills the international real estate adviser has reported that luxury rental property in London has seen rental income rise by 10% in the past year plus 1.8% in the quarter. The news is a double blow for London tenants and buyers as London house price have also seen steady increases. House prices across the UK have seen stagnation or decline however prime London areas are bucking the trend . Recent reports suggest that overseas buyers are driving up house prices in London and now it appears that rental prices may be doing the same.

The report highlights the following

• Prime central London rents still below peak, but saw biggest quarterly rise for years in Q2 at +3.8%
• Demand from City-based tenants is driving up rents – in Hampstead and Islington rents are 15% over peak
• International demand push rents up by 5% in the quarter in St John’s Wood and RegentsPark, now 20% over peak
• Yields flat-lining as capital growth keeps pace with rental growth

Flats have marginally outperformed houses across all prime London and rents are now 4.9 per cent over peak, compared to 2.1 per cent for houses.  A similar pattern is emerging in prime central London locations

“A number of different factors are now driving the market,” says Yolande Barnes, head of Savills residential research.   Ã¢â‚¬Å“A boost in demand from international and corporate tenants is driving values in central locations, but rental growth is underpinned by strong and growing demand from would be buyers unable to access home ownership.  Constrained stock levels are creating competition and an upward pressure on rents.

North and East dominate London rental growth

The biggest price rises over the past year were seen in St John’s Wood and RegentsPark where international tenants dominate, and the prime East of City locations, Wapping and CanaryWharf where a revival in financial sector employment and sentiment are boosting occupancy rates. 

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