The London private sector rental market proved to be resilient in 2017 and despite a year of economic and political uncertainties demand from tenants remained strong, research suggests.
Several factors contributed to this robust performance, according to the research from independent agency Benham and Reeves Residential Lettings which shows a 19.7% rise in tenancy volumes compared with 2016 and enquiry levels up 16.5%.
According to lettings director Marc von Grundherr demand for high quality rental properties is still increasing. ‘We saw a dip in the number of Europeans moving to London, but this was balanced out by rising numbers of professionals relocating from the US, Australia, Asia, South America, Japan and China,’ he said.
‘Tech firms such as Facebook, Google, Apple and Amazon are setting up new offices in London, adding to increasing rental demand while we also saw a rise in the number of international students moving to the capital,’ he explained.
But he pointed out that the rental market continues to face challenges and remains price sensitive. ‘Increasingly, applicants expect to negotiate with landlords so rents have remained flat, with many tenants renewing at the same or slightly lower rents,’ he said.
The firm is advising landlords to prioritise retaining their current tenants, as avoiding a void is usually the best option in a competitive market. ‘The good news for landlords is that, with tenants prioritising stability, most are renewing their existing tenancy rather than move and some of our branches have been seeing renewal rates as high as 90%. An average tenancy now lasts two years and three months,’ Grundherr added.
The company’s research also found that new developments have seen the highest growth in demand from tenants, with the agency receiving 74% more enquiries for new build apartments than for period properties.
Urban regeneration schemes such as Nine Elms and Battersea Power Station have transformed areas of the capital, creating new hotspots where rental demand has really taken off in 2017.
This is a trend the company expects to continue and 2018 is also likely to be influenced by the opening of the Elizabeth Line (Crossrail), opening up rental hotspots in new locations, often in Zones 3 and 4, with tenants continuing to move out of central London to areas which offer better value for money.
‘Although 46,000 new build properties have completed this year, this falls far short of what is needed, so we expect the demand for rental property to remain strong,’ Grundherr concluded.