London’s super-prime rental boom is showing no sign of letting up.
There were 42 £5,000 + per week tenancies agreed in the first four months of 2017, according to LonRes data mined by Knight Frank, up from 33 in the same period in 2016.
Looking at the annual figures, 122 such tenancies were agreed in the year to April, one fewer than the previous 12-month period, but the uppermost end of the market has been rocking – a whopping 30 £10,000 + per week tenancies were put through, a marked increase on the 20 seen in the previous year.
Recent stamp duty reforms and uncertainty over the short-term prospects for price growth in the sales market look to be driving the trend, says Knight Frank, whose research shows that 231 super-prime lettings deals were recorded in the the two years following the December 2014 stamp duty rise, a 9.5% increase on the preceding two-year period
Flats made up 36% of the overall super-prime lettings market in the year to April 2017, said the firm, down from 41% in the preceding year, while Knightsbridge and Kensington have led the way in terms of areas.
Tom Smith, Knight Frank’s head of super-prime lettings (whose team agreed four tenancies above £20,000 per week between February and June): “A wider mood of uncertainty has picked up following the snap general election and the start of Brexit talks. At this price point, there are tenants who are able to rent in the short-term and buy when they sense that a greater degree of stability has returned.
“One reason the number of tenancies agreed is not higher is due to limited stock availability. It is less of an issue for tenants wanting a family house in, say, north London but large lateral space in prime central London is at somewhat of a premium.”
With all this demand around at the moment, landlords can achieve “notable premiums” if their properties present well, said Knight Frank regional partner David Mumby: “If a landlord is able to reconfigure their existing space and fit-out the property to the right kind of high specification, it can be the difference between £3,000 and £6,000 per week.”
Knight Frank’s biggest deals so far this year have included a £29,000 per week mansion in Belgravia, a £27,500 per week townhouse on Mayfair’s Upper Grosvenor Street, and a recently-restored 12,000 square foot Grade II* listed mansion on Eaton Place – one of the biggest single family homes in Belgravia.
Other agents have also been reporting this trend for top-end rentals in London’s Golden Postcodes.
“Taking a pragmatic approach has seen savvy developers and sensible vendors take a decision to offer their properties to the rental market for a two to three year rental rather than reduce the asking price and lay themselves open to accepting an even lower offer,” says independent buying advisor Simon Barnes, who has been involved in some of London’s largest lettings deals. “The advantage being that over a limited term they can achieve exceptional rental revenue, whilst retaining their property asset and relaunching on the market at a later time when the PCL super-prime market looks promising. It really is the common sense approach to wait until the market shows a positive change assuming no forced sale is involved.”
Meanwhile, Savills’s Super-Prime Lettings team, which deals with properties asking upwards of £4,000 per week in PCL and North London, saw transactions triple in the first three months of 2017 compared with the same period a year earlier.
Increasing numbers of luxury rental properties have been brought to the market over the last 12 months, said the firm, mainly by developers and those looking to avoid selling in a testing sales market.
This extra supply is being met squarely with heightened demand from HNWI tenants; many who only need a base here for a few years are apparently deciding that renting can make more financial sense than buying, especially after weighing up the SDLT costs…
Pent-up demand has been building steadily, but it seems the “full effects” are really being felt in 2017; new applicant registrations in PCL more than doubled in Q1, compared with the same period last year.
Corporate tenants, families, entrepreneurs and well-off students have been driving much of this, and Savills expects the market to continue to flourish as sales struggles with transaction costs and ongoing uncertainty.
Top-end buying agency Black Brick, meanwhile, reports that nearly a third (30%) of its searches in Q1 were for rental properties, compared with just 8% in the same period last year. ““Increases in Stamp Duty have added tens of thousands of pounds to the cost of moving house, meaning that buyers tend to want to take their time before making a purchase,” says the firm’s Managing Director Camilla Dell. “Prime Central London rentals are particularly popular with overseas buyers, who wish to spend time getting to know London before committing to a purchase.”