London’s wealthiest tenants are paying an extra 1.4 per cent to rent prime areas in the city, according to estate agent Savills. The trend indicates a continued demand for luxury spaces in the

capital. In addition, over the past three months, London’s wealthiest tenants have been seeking smaller spaces to rent, leading to a 1.6 per cent growth in one-two bed properties. However, Savills notes that the “lack” of available stock has pushed up the prices of homes in affluent regions of London hot spots, such as South West and North and East London, by 1.8 per cent and 2.8 per cent respectively.

Just under 60 per cent of Savills agents agree that a lack of stock is limiting tenants’ choices, while a third of agents say that tenants are expanding their search across multiple London locations. The market continues to suffer from a lack of stock, with some landlords selling up, and tenants locking in for longer to secure existing rental prices. However, 43 per cent of London agents believe that stock will increase over the next three months as tenant demand waivers, and as more accidental landlords filter through from the sales market.

The lack of demand for prime areas has also led to a demand in the middle-class regions of London’s inner commuter belt, with demand for homes in Tunbridge Wells and Harpenden up 3.3 per cent and 2.6 per cent respectively in the first leg of the year.

Jessica Tomlinson, residential research analyst at Savills, noted that while the rental market is continuing to defy all expectations, rising inflation and the increased cost of living means that rents cannot be expected to keep pace. Rental growth has picked up again after a seasonal slowdown experienced towards the back end of last year. Smaller properties are continuing to outperform larger homes, indicating that the market is now dominated by needs-based tenants rather than discretionary tenants who tend to spend more.

Uma Rajah, CEO and Co-Founder of CapitalRise, commented that as London continues to attract buyers, tenants, and investors from around the world, the almost fixed supply of prime central London (PCL) property helps to maintain demand and harden rental prices. The capital enjoyed rental growth of 1.4 per cent in Q1 2023, with PCL recording the highest quarterly growth of all London regions in Q4 2022 at one per cent, and the second-highest annual growth at 9.2 per cent. This continued success is indicative of the PCL market’s overall attractiveness and ability to bounce back more quickly from market shocks, such as the mini-budget from the final quarter of last year. Even during the pandemic, PCL was less impacted compared to other London markets, not least the rest of the UK.

In conclusion, the rental market in London is continuing to see demand for luxury spaces, with tenants willing to pay more to rent prime areas. While a lack of stock is limiting tenants’ choices, the market is predicted to see an increase in stock over the next three months. Furthermore, the PCL market has demonstrated its overall attractiveness and resilience, with strong growth despite market shocks. Photo by Paul Farmer, Wikimedia commons.