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Lack of homes to rent supporting growth in London lettings markets

A scarcity of lettings stock is supporting rental growth in the prime property market in London, but high levels of renewals resulted in fewer new lets in the second quarter of 2019.

The LonRes prime London lettings index recorded a 2.3% rise in achieved rents in central London, a 1.4% increase in prime fringe, and a 0.9% fall in prime London overall compared with the second quarter of 2018.

The data also shows that 34% of properties let had a rent reduction before securing a tenant, down from 39% in the second quarter of 2018 and 47% in the second quarter of 2017.

In the prime central London market the average rental value in the second quarter of 2019 stood at £50 per square foot.

Looking ahead, 50% of respondents to the LonRes agent survey expect rents to rise over the coming 12 months while 5% thought rental values would stay the same and 15% expect them to fall.

The report also reveals that gross rental yields have been increasing annually since the fourth quarter of 2017 across the three prime areas. Over the past five years rents in prime central London have risen 6% while house prices have fallen by 13.4%.

Demand from prospective tenants is rising. Some 47% of respondents to the survey reported an increase in applicants registering in the second quarter of 2019 while 13% saw a fall, compared with the first quarter of the year.

Properties priced at £1,000 per week or below were most in demand while agents reported less interest for homes priced at £3,000 per week or more.

Stock remains scarce. In the second quarter of 2019 new instructions across the three prime areas fell 4.3% compared to the second quarter of 2018 and compared to the second quarter of 2016, new instructions have fallen by 22.9%.

New lets agreed over the first three months of 2019 fell 12% compared to the same period a year ago. In prime central London they were down by 3%, in prime they were down 11% and in prime fringe by 20% compared to 2018.

‘This year, with a Tory leadership contest and Brexit negotiations stalled, many would-be movers could have postponed their decision to transact. In some areas they did, yet in prime central London more properties changed hands this year than last, with sales up 3% on the second quarter of 2018,’ said Marcus Dixon, head of research, LonRes.

‘In the lettings sector, agents reported an increase in demand this quarter. This, coupled with an ongoing lack of stock, meant rents rose again this quarter, up 2.3% on the same three months last year. But, with renewal rates remaining high, less stock came back to the rental market, resulting in another fall in the number of new lets this quarter,’ he added.

Source: Property Wire

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London most expensive European city to rent in

London has been named the most expensive city for rental accommodation in Europe, for the third consecutive year.

Last year, rent in London was £3,693 more expensive than the average monthly cost in Europe, according to figures from consultancy firm ECA International.

The average price of an unfurnished, mid-market, three-bedroom apartment in the capital costs around £5,398 per month, almost £4,000 more expensive on average than other major cities in the UK.

The research compares the rental costs of accommodation in areas that are normally inhabited by expatriate staff, such as New York and Hong Kong.

Alec Smith, accommodation services manager at ECA International, said Manchester, Edinburgh and Glasgow had seen the biggest rent increases in the UK due to high demand for rental property.

Contrastingly, Aberdeen saw rental prices fall by 16% as a result of employers sending staff back to their home locations as a result of to the downturn in the oil and gas industry.

While London’s rents were ranked the most expensive in Europe, it dropped into fifth place in the world behind Port Morseby in Papua New Guinea, due to the pound’s fall in value following the Brexit vote.

“Changes to stamp duty in 2016 led to a rush from landlords to purchase buy-to-let properties, which increased the supply of rental accommodation across prime areas in London,” said Smith.

“This increased competition among landlords contributed to modest falls in average rent in the UK’s capital, although it is still the most expensive in Europe.”

Ireland’s capital Dublin had one of the highest rent increases in Europe, resulting in it entering the top 10 of most expensive cities for rental accommodation for the first time.

“The past 10 years have seen a significant turnaround in the fortunes of Dublin’s residential market. The global financial crisis exposed a property bubble in the Irish capital and rents have increased significantly with each subsequent year of recovery,” said Smith.

He added that the cost of rents were also affected by elevated demand from international companies relocating staff while attempting to take advantage of the low corporate tax rate on the island.

Eastern European cities such as Prague and Warsaw also saw sharp increases in rental prices, climbing more than 10 places in ECA International’s rankings.

Hong Kong remained the most expensive place for rental accommodation in the world with rent averaging around $10,461 (£7,588) per month, while in the US, New York remained the most expensive for expats in the US, despite prices falling in the last year.

Source: Economia