Prime London Lettings Index: April 2020
PCL lettings index: 165.4
POL lettings index: 172.2
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Renters in London and the Home Counties are turning their attention to life after lockdown.
The number of new registrations for prospective tenants was 59% below the five-year average in the first week of the lockdown (week ending 28 March) but that decline had narrowed to 38% by the week ending 2 May. The total figure has doubled over that time.
Meanwhile, web views are also on the rise. In the first week of the lockdown, the figure was 2% above the five-year average but this had grown to a 14% increase by the week ending 2 May.
This weekend, Prime Minister Boris Johnson set out some of the parameters for how restrictions will be relaxed in coming weeks. This is likely to include a return to physical viewings, which will take place within social distancing guidelines.
In a sign of how activity is picking up, in the City, East and Riverside region of London, 105 virtual viewings took place during the first week of May, which led to 21 offers. This compared to 51 viewings and 7 offers in the week before lockdown measures were imposed.
Rental values are subject to ad hoc renegotiation but thin trading means there is a lack of comparable evidence that points to a clear trajectory.
Knight Frank’s prime central London rental index fell 0.4% between March and April, which was the largest monthly decline since October 2016. It meant annual growth slipped to 0.7%, which ended a run of progressively stronger figures that began last June.
In prime outer London, rents were broadly unchanged over the last 12 months after a decline of 0.2% between March and April, the biggest monthly fall since December 2018.
Rental values have strengthened over the last two years as tax changes for landlords caused supply to fall. This trend was accelerated by growing demand due to political volatility surrounding Brexit, which meant demand transferred from the sales market.
Our view is that rental values in prime central and outer London will remain flat over the course of 2020, with some upwards pressure returning during the second half the year, with the market potentially benefitting from any economic uncertainty as lockdown measures are eased.
We maintain our view that rental values will rise by 10% in prime central London and 11% in prime outer London in the five-year period to the end of 2024.