Prime Central and Outer London Lettings Index – March 2020
New and newly-refurbished properties are proving easier to let in the age of virtual viewings says Gary Hall, Knight Frank’s Head of Lettings
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PCL March lettings index: 166.1
POL March lettings index: 172.5
New and newly-refurbished properties are letting more readily as virtual viewings become more widespread during the government lockdown, says Gary Hall, Knight Frank’s Head of Lettings.
“Such properties, often in apartment blocks, fill potential tenants with more confidence they will resemble what they look like on screen in real life,” says Gary. “It means lettings markets in areas like King’s Cross, east London and along the River Thames are performing better at the moment.”
In the three weeks since lockdown measures were imposed, the number of tenancies begun in the City, east London and Riverside area increased 23% versus the five-year average, Knight Frank data shows. This compared to a 2% fall across the whole of London and the Home Counties.
Around half the tenancies were agreed before lockdown measures were introduced, which explains why the figures are up on last year, says Gary. Current activity levels are down, with the number of new prospective tenants registering in the week to 4 April down by 52% versus the five year average.
“Demand in these more affordable areas had been getting relatively stronger anyway but the outperformance in recent weeks is also explained by the type of property on offer,” says Gary.
Current activity in the lettings market relates to transactions that were underway when lockdown measures were imposed and empty properties, with social distancing rules being observed by landlords and potential tenants.
Rental values in prime central London increased 1.2% in the year to March, data collected before government restrictions shows. It was the biggest increase in more than a year and reflects how rental values had been strengthening due to lower levels of supply as landlords are faced with a growing tax and regulatory burden.
Average rents grew by 1.1% in the year to March in prime outer London, which was the largest such increase since September 2015.
With the rental market subject to the same government Covid-19 restrictions as the sales market, Knight Frank estimates that net impact of a phased return to more normal levels of activity means the number of tenancies agreed in prime markets in London and the Home Counties in 2020 will be around 25% below the five-year average.
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.
As the chart above shows, the ratio of demand to supply had increased to more than double the figure of the last recession in 2008, which will maintain upwards pressure on rental values.
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.