Rental rates in central London are finally beginning to drop after buy-to-let investors enjoyed a period of substantial growth, according to a property consultant.
Tenants in the heart of the capital experienced a nine per cent rise in rental rates between the fourth quarter of 2010 and the final three months of last year, Cluttons said. Rates were 10.3 per cent ahead of those measured in the first quarter of 2008.
However, rates dropped by 0.4 per cent between October and December last year and more decreases are expected in the early part of the new year. Rental rates were driven up by a serious shortage in supply on the market last year, but this is forecast to readjust in the spring.
Landlords are keen to keep good quality tenants in place and avoid periods where their properties are empty, so they have shown greater flexibility over the period, the report says. Tenants have become sensitive to prices due to nervousness over job prospects and lack of promotion.
Tenants and relocation agents have been forced to consider other areas of London after being faced with reduced budgets and the cutting or withdrawal of corporate housing allowance. People are now looking to areas such as Islington, which have lower priced properties but still have strong commuter links to the City, the property consultant said.
Some landlords in prime central London areas are adjusting their expectations and accepting lower offers.
The report also said the number of people who were willing to share properties to remain in central locations and contain costs had increased, especially in areas such as Hyde Park.
Cluttons partner for residential lettings Lynn Hilton said: “The remarkable growth in rental values seen last year could not continue and this correction in values will bring the market back to a more stable level.
“While there is considerable economic uncertainty, we don’t anticipate a drastic reduction in rents as demand is still high, but tenants will undoubtedly welcome increased choice and negotiating power.”
The property consultant’s findings are in line with the LSL Property Services’ Buy-to-Let Index for December published last week, which found rental rates in the capital had fell slightly after a year of increases.
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