Although average rents have improved by over four per cent in the second quarter of this year, this is after three quarters of decline. Rents for the area are still down for the area year-on-year with letting agents having to temper landlord expectations.
Elsewhere in central London, rental values have mostly remained unchanged while the inner suburbs in both east and west London showing moderate growth of two to four per cent. In fact, almost all areas of London that have a strong domestic market have seen a sustainable rise in rental values while investor led markets in Knightsbridge and Canary Wharf have not faired as well.
The biggest driver for this change is the value of sterling. With the European Central Bank refusing to rule out more quantitative easing and Sterling at a six year high against the dollar, the overseas tenants who are drawn to prime central London are seeing their spending power reduced. Meanwhile, the British economy is gaining strength and consumer confidence is growing in the domestic market. This does not bode well for prime central London rents but explains rising rental values in the inner and outer suburbs favoured by British tenants.
Marc von Grundherr, Lettings Director of Benham & Reeves Residential Lettings said:
“The rise in prime central London rental values is slightly misleading. Although rents have gone up, you have to look at prime central London's performance over the past year. It has a lot of ground to regain before it reaches former levels and with exchange rates as they are, I do not see growth in the short term. Right now, it is all about the domestic market.”
