The pendulum swings the other way as PCL gains and family friendly areas overheat

In the latest survey tracking rental returns across the capital from Benham & Reeves Residential Lettings, figures show that a reversal of fortune is taking place. Compared to Q2 2014 figures, Prime Central London (PCL) which had seen significant falls, started to see some recovery in Q3. Meanwhile, rental hotspots in zones 2 and 3 finally began to cool.

Knightsbridge, Belgravia, Mayfair and much of the West End experienced falling rents earlier this year as the strong pound took its toll, and there was a general feeling that the market in this area had reached its peak. Tenants were negotiating on rents or choosing to move out of these areas completely. More recently, tenants have begun to take advantage of falling rents, driving demand and rents upwards once again.

As PCL regained its pull, outer areas saw falls in rents. When rents in Fulham are nearly on par with parts of Chelsea, most tenants will opt for the more central location. Huge swathes of the suburbs also saw falls in rental returns as markets reached their peak. Much of north London saw falls while areas such Greenwich and Bermondsey proved not to be immune, either.

Marc von Grundherr, Lettings Director at Benham & Reeves Residential Lettings adds, “We predict that rents will remain flat across most parts of London. Corporate budgets are not being increased and more stock is coming on. One area of focus, the Nine Elms regeneration area, is predicting 15,000 new units entering the market starting with the Riverlight development by St George coming on stream soon followed by Embassy Gardens and finally much anticipated Battersea Power Station with completions from 2016. Our investors are taking the long view, though, and while rents are not increasing, they are seeing good capital growth. Since most of them bought at least five years ago and have no plans to sell anytime soon, they are fairly satisfied with the overall return on investment.”