The result is that London has become a landlord’s market. Average rental values in prime central London rose by 2.8% in the three months to September, the largest quarterly increase in a decade.
Knight Frank analysis of LonRes data shows that there were 45 super-prime tenancies agreed in Q3 2021, up from 34 in Q2. The overall number of super-prime lettings deals in the year to September 2021 was 147, compared to 123 over the previous 12 month period .
A maximum rental value of £40,000 per week was recorded for Q3, while August was one of the highest months on record for the number of super-prime lettings deals agreed by Knight Frank.
The information provided also reveals that supply of new £5,000-plus per week listings is at its lowest level since Q4 2016, with Knightsbridge, Kensington and Mayfair proving to be the most popular neighbourhoods for super-prime tenancies agreed in the year to September 2021.
Knight Frank reports that supply remains low because a number of owners sold in order to capitalise on a resurgent sales market over the last 18 months, producing fewer so-called accidental landlords, while demand for high-value lettings property has been driven by the desire for more space following successive lockdowns.
These trends combined with other factors this summer to increase activity, according to Tom Smith, head of super-prime lettings at Knight Frank.
He said: “A number of people in London were affected by flooding, which produced a spike in tenants needing a rental property for six to nine months. On top of that, people came back from holiday, there was a seasonal rush ahead of the schools re-opening and all that was happening just as international travel was kicking back in.”
Smith says that supply is so tight that some tenants have resorted to signing pre-let agreements in order to secure the right property, something that Tom says has not previously been seen in the market.
One recent super-prime deal in Kensington saw a family house undergoing complete renovation that was let six months before it was even finished, demonstrating just how strong tenant demand can be for sought-after properties.
Smith commented: “To get around the supply shortage some have acted ahead of time and secured tenancies on the back of design drawings and the track record of the developer.”
Others who have been unable to find the right property have agreed short-let tenancies or have booked into hotels.
The imbalance between supply and demand has highlighted a gap in the market that existing and prospective landlords can take advantage of
Smith continued: “I’m not sure clients and investors have woken up to the size of the opportunity in the short-let super-prime market in London. Irrespective of budget these searches are often really tricky given the lack of high-calibre turnkey options in the market geared towards stays of 30-90 nights.
“We’ve had a £20 million penthouse on our sales register that has sought to take advantage of this market whilst they look to attract a buyer. When it was made available for short lets there have been very limited periods when they have struggled to find tenants.”