Q1 Review – Lettings Market 2012
- 200% increase in Q1 activity (year on year)
- Lack of demand in high end properties
- Olympic rents brought down to earth
- Demand for prime one bed units continues to outstrip supply
- Rents finally plateau
The rental market in the West End, City and Docklands has experienced an increased level of new tenancies compared with the first three months of 2011. Prices remain consistent to those of the last three months of 2011 and it is clear to see that rents across the board are no longer rising. The sector had enjoyed a steady 5%-10% increase year on year for the last 2 years, but, as most London commentators have reported the market is now experiencing a plateau with regard the expected level of rents
With prices holding firm for the first time in two years it has given tenants the opportunity to source alternative accommodation. Up until recently rising rents have prevented tenants from moving as the open market only offered comparable property’s at a higher rate. This new found stability in rental levels has ultimately created more fluidity within the sector and as a result we witnessed a 200% increase in new tenancies starting across the West End, City and Docklands compared with the first three months of 2011.
The beginning of this year has also brought some long awaited realism to the market with regards to the Olympics and the prospect of sky high rents being achieved for London properties. There have been some cases where properties have been let for up to five times their actual AST (assured shorthold tenancy) rate but in general many London property owners have been left disappointed as promises of exorbitant rents have just not materialised.
As reported in the Guardian (1 April 2012) many local residents to Stratford had grand ideas of around the world trips paid for by the renting of their properties for up to £10k a week during the games. These types of estimates have now been laughed off by many short term operators specialising in Olympic accommodation. LOCOG (London Organising Committee of the Olympic Games) have recently confirmed that around 20 per cent of the room nights they had booked would now be returned to the hotels for them to offer up to other customers, this action further reduces the chance of single properties being let to overseas visitors during the games.
Despite the dramatic increase in activity during the first three months of this year, Q1 is traditionally regarded as the most challenging of periods for the sector. As we move towards the spring the forecast for the rental market appears to be consistent across the West End, City and Docklands. Rents are predicted to stay firm for two bedroom apartments, expected to fall for 3 bed and high end properties, and expected to continue to rise for prime one bedroom units as demand outstrips supply.
We will wait to see what effect, if any, the Olympics has on the market as the year progresses, it is clear that London as a whole may struggle from logistical issues that the Games will bring. Road closures, public transport disruptions etc. will no doubt have an effect on how businesses and markets operate throughout the City and the lettings market will not be immune from this.