Prime London rental prices strongest in a decade as demand soars

Prime London rental prices have recorded strongest quarter since March 2011, driven by a return to the office and the reopening of international travel, according to latest analysis from Savills.

Higher demand from renters has pushed prime central London rental growth up by 3.6% on the quarter, surpassing quarterly growth in the prime commuter belt. Also not seen since before the pandemic.

Across London, prime rental prices are now up 1.6% year-on-year, with a number of popular family house locations in the south west, including Wandsworth (+7.3%) and Wimbledon (+6.1%), seeing significant price increases on the year.

Q3 2021 All prime London PCL North West South West West North & East
Quarterly growth 2.9% 3.6% 1.0% 2.1% 1.9% 4.2%
Annual growth 1.6% 1.2% 0.0% 5.0% 1.4% -1.0%
5 year growth -5.0% -14.4% -6.9% 2.6% -0.5% -3.1%

Source: Savills prime London lettings Index, Q3 2021

Back to work effect: flats outperform houses

The flats market has also started to recover, as price increases for prime London flats outperform houses on the quarter for the first time since December 2019 (+3.2% vs. +2.5% in Q3).

In particular, properties with no outdoor space are starting to bounce back – with growth up 3.5% over the past three-months – overtaking properties with gardens (+2.4 %), owed in part to a shortage of stock, which is driving tenants to compromise on their wish lists in order to secure a tenancy.

Across the prime commuter belt rental markets, growth in cities is now 8% up on the year, more than villages, towns and rural areas, at 6.%, 6.6% and 6.5% respectfully.

Prime London landlords upgrade price expectations

The return of office workers and students has meant that hotspots in North and East London –particularly Shoreditch and Clerkenwell – are seeing the highest quarterly growth – at +9.6% and +7.4%. Pushing prices to recover on the year (Shoreditch -0.5% and Clerkenwell +0.4%). Here, tenant applicant numbers have jumped up a significant 27% in Q3, despite there being a week of September left.

As a result of the significant uptick in demand across all property types and locations, nearly all London agents are now reporting a lack of stock (94%) – with almost three-quarters (72%) of agents stating that the shortage is significant.

Amelia Greene, director in the prime lettings team at Savills, said: “The return of international travel, combined with a complete easing of restrictions, has sent the prime lettings market into a frenzy.

“Demand is up across the board – and nearly every branch is reporting competitive bidding. Hotspots in North and East London have been particularly popular due to workers desire to walk to the office, and the return of students to the capital.

“In some instances, tenants are ensuring that they are the most appealing candidate by paying for a full year upfront, or by committing to properties site unseen. As a result, we have seen a huge pendulum swing in favour of landlords and nearly all  landlords expect to see an increase in rental prices. Now is the opportune time to bring a property on to the rental market.”

Outer commuter locations outperform London’s suburbs

Prime commuter belt rents are now up by 6.8% on the year, as tenants anticipate continued hybrid working patterns.

Outer commuter locations experienced the strongest growth on the quarter – with Henley (+3.2%), Windsor (+3.1%) and Cambridge (+2.6%) coming out top. Suburban locations and those within London’s inner commuter zone such as Tunbridge Wells (+12.8%) and Sevenoaks (+9.4%) continued to experience notable annual rises.

Greene continued: “Locations in London’s commuter belt have seen exponential price growth over the last year, as a result of strong demand from tenants heading out of the city in search of more space. Now, we are starting to see applicant numbers soften and inner London locations ramp up. However, a severe lack of stock will continue to underpin higher prices in the short-term.”

Rental outlook: pandemic property trends here to stay

Despite a return to normality, and more workers back at their desks, private outdoor space (72%) and space to work from home (66%) continue to rank as the top two priorities for prime tenants, ahead of proximity to transport (53%) and the workplace (31%), according to agents.

“The easing of pandemic restrictions – including international travel and a significant uptick in corporate and student demand – over the past three months has played a major role in the recovery in the prime lettings market,” said Jessica Tomlinson, research analyst at Savills.

“But while prices are recovering , tenant attitudes and prime property preferences have permanently shifted. Many tenants may be willing to forgo proximity to their workplace and good schooling for a private garden and more space to work from home, which will continue to impact which areas of London see the highest growth in the long term.

“While it’s still early days, the outlook is positive for more central locations. We expect to see an even more sustained return to rental growth in the capital for the remainder of this year and a more significant bounce back in 2022.”


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