Good news for landlords as tenant demand remains strong

The latest report from Knight Frank has revealed that the number of tenancies agreed in prime central London was higher in the three months to November than last year.

Related topics:  Landlords
Warren Lewis
8th December 2016
Front doors

According to the report, despite a moderate slowdown ahead of the Christmas holiday period, the number of deals in the three-month period was 23.2% higher than in 2015.

The seasonal dip in November, aggravated by uncertainty surrounding the US election result, followed two successive record months for Knight Frank August and September for tenancies agreed.

One support for higher activity levels is the fact higher stock levels have put downwards pressure on rental values, which has boosted affordability for tenants, whose negotiation position has strengthened over the course of this year.

Higher supply is the result of increased regulatory uncertainty in the sales market, which has meant a growing number of vendors have opted to let their property rather than sell until more clarity emerges surrounding future pricing trends.

Annual rental value growth declined to -5.2% in November, which is the weakest it has been since December 2009. However, we forecast growth will ease to -2% in prime central London West in 2017 and remain flat in prime central London East.

The pattern of higher deal volumes is more marked below £1,500 and above £5,000 per week, while activity remains weaker in between, a section of the market traditionally driven by senior executives in financial services.

While broader uncertainty persists over issues including the UK's decision to leaves the EU and the election of Donald Trump, the extent of the cost pressures faced by banks was underlined in November when several banks failed to meet certain Bank of England stress tests.

While there is a sense any future headcount reductions are unlikely to match previous redundancy rounds which have followed similar tests, optimism levels remain down on a year ago, according to a PWC/CBI data.

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