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The London rental market 2016 – A year in review

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The last 12 months have been a time of uncertainty in the UK but thankfully in the face of this type of instability the rental market tends to perform well, as applicants seek to rent a property rather than buy as it allows them the flexibility to move easily to pursue new job opportunities.

This has certainly been the case this year and despite the constantly changing political and economic situation, the London lettings market finishes 2016 on a high.  In fact, September 2016 was our best month on record, with transactions up across all our branches from applicants looking for well-priced rental accommodation in London.  This is in spite of a decrease in footfall across our Zone 1 branches; instead applicants are using online mediums to search for rental properties and this is simply a sign of changing times. Our websites and digital marketing are therefore increasingly important to us and we end the year with an increase of 4.6% unique users to our main website and an increase of 380,000 more page views for the twelve month period. Interestingly, above 88% of searches were for property priced between £350 – £500 per week. As corporate individuals look for affordability and more new stock is available to rent, landlords who are flexible with their rental are seeing their properties let quickly within these price points.

Kew branch

However, we still remain committed to increasing our on-site presence at a local level, serving landlords and tenants in the most effective ways possible. We continue to focus on our long-term strategy of opening new branches on-site in key new London residential developments, with new branches opened in Kew and Nine Elms this year.

It is clear that tenants are continuing to focus on value for money, with applicants seeking to reduce their accommodation costs wherever possible.  This could be by accepting a slightly longer commute in order to save £25 per week in rent, or it could be by renewing their tenancy at the end of the year to eliminate the costs of moving.

With budgets at the uppermost of many tenants’ minds, we are advising landlords to be realistic about rents and to consider the bigger picture as void periods can be costly. If a property is over-valued, it will not rent quickly and waiting for a higher rent can be counter-productive, the resulting void costing more money in the long run. Rents may possibly rise in the second quarter of 2017 as recent tax changes hit landlords’ pockets so we are already advising tenants to factor this into their long-term budgets.

The year ends with a much higher rate of tenancy renewals than previously, with the length of an average tenancy now increased to 17 months, suggesting tenants are preferring to remain in their current property to maintain stability and security until the UK officially exits the European Union.

Rental demand in London in 2016: Area by area

West London (Hammersmith, Ealing, Kew/Brentford)

Our Hammersmith branch at Fulham Reach has seen extraordinary rental demand this year, with high numbers of enquiries and properties letting very quickly. Demand has at times outstripped supply but on the whole, with new buildings launching such as Goldhurst House, we have had good stocks of apartments to meet the high demand.  Generally apartments have been achieving close to asking rental.  There has also been strong demand for other local residential developments such as Hamlet Gardens, King Henry’s Reach and the Beacon Tower at Putney Plaza. Larger units are taking longer to rent and we advise landlords to be as flexible as possible on rentals so voids can be kept to a minimum.

Two bedroom apartment at Dashwood House

In Ealing, our branch at Dickens Yard has also reported exceptional demand throughout the year and this has been our most successful year since our branch opened in 2012, with business up 15% on 2015. The launch of new apartments at Dashwood House and at the second phase of Fitzroy House, has had a positive impact on availability meaning we have on the whole had good stocks to meet demand. We opened our new branch at another St George development, Kew Bridge in Brentford, in March and again, we hit the ground running. Rental demand has been consistently high with applicants keen to find value for money in a previously less well known area of London yet one that is close to the river and only a short commute from central London.  Business here is brisk and demand has been outstripping supply for one and two bedroom homes.

Central London (Knightsbridge, Kensington, Hyde Park/Paddington)

The rental market has performed well in Kensington this year, although the constantly changing economic and political situation has meant demand has been harder to predict than normal. In the lead up to the EU Referendum demand was slower than normal at this time of year but this led to a surge in demand, with a very busy July and August which continued into the autumn.With such uncertainty, renewal rates are up by nearly 30%, to around 70%, as tenants prioritise stability and seek to reduce costs. Apartments in new-build developments remain extremely popular and many applicants are prepared to pay a little extra for homes that are particularly well-presented. Rentals are taking a little longer to secure at the higher end, consistent with an overall drop in demand for accommodation above £1,000 per week. To compete with these high spec properties, we recommend that landlords update furnishings and redecorate where necessary.

Our Knightsbridge branch has seen good demand during 2016 although the dramatic events of this year again have made the rental market unpredictable. Overall the picture has been good though and we had an excellent third quarter in 2016 (our latest complete figures).  Tenancy renewals are high at 85%, up 10% on this time in 2015, with tenants generally choosing to save money by remaining in their current home, as is the case in many areas. With market conditions moving quickly at times and the full effects of Brexit still to be seen, we are advising landlords to talk to their letting agent for advice regarding current rents and market conditions.

Three bedroom apartment at Merchant Square, Paddington

Properties have been letting well around Hyde Park in 2016 and in particular the corporate market has been very strong this year. We have seen a continuing demand for high end, premium properties in specific residential developments in Mayfair and Fitzrovia. One and two bedroom properties have remained most popular, with apartments in the new developments at Paddington Basin receiving high numbers of enquiries. We have also seen increasing numbers of tenancy renewals here, which now stand at over 90%.

North/North West London (Hampstead, Highgate and Beaufort Park)

Hampstead remains a highly-sought after area for professionals living in London so unsurprisingly, we have again seen strong demand for properties here throughout the year. Even though 2016 has seen a lot of uncertainty we had a record October and November and December looks as though it will end on a high too. Enquiries have been plentiful throughout the year both for one and two bedroom apartments.  The relocation market has been active with professionals from Japan, the US, Turkey and Europe continuing to move to Hampstead, most with good budgets.  An interesting trend this year has been the increase in instructions to let larger properties in particular, as some property owners have been reluctant to sell at the moment, deciding to rent their property instead.  Some properties have been sticking due to a lack of demand for homes over £1,000 per week and others don’t match the expectation of today’s tenants who want a modern, high-specification interior. Landlords need to keep up with refurbishing their properties if they want to let their property quickly to a corporate tenant.

2016 was a record year for us at Beaufort Park Colindale which was our top performing branch, seeing a 28.5 increase in transactions over 2015, a pattern which we expect to continue. Lettings have gone from strength to strength throughout the year as we see a continuing trend for tenants moving out of central London to find more value for money on the fringes of the Capital.  With the launch this year of new apartments at Goldhawk House and Golding House, we have plenty of new instructions too, mainly one and two bedroom apartments.  2017 will see the launch of Sterling House so we expect availability to remain good while demand has also been strong for other local developments such as the latest phase of apartments at The Pulse.  Enquiries are also coming in for Colindale Gardens with the first phase expected to launch later in 2017.

In Highgate, we have seen the rental market perform better this year, with more enquiries, more transactions and more instructions than during 2015. The number of transactions we concluded is up by nearly 30% while the number of instructions we have received is also up around 28% on 2015 so we have had good stock to meet demand.  One and two bedroom apartments have been renting as quickly as ever, while relocation agents have been more active looking for homes for City execs relocating to London, both smaller properties and larger family homes.  The number of tenants renewing is also up this year.

City, Docklands and East London (City, Canary Wharf and Wapping)

One bedroom apartment listed with our Canary Wharf branch

In the City rental demand has been consistently good in 2016, with enquiries increasing throughout the year for smaller units under £500 per week. A number of new residential developments have launched and been very well received by applicants, notably Aldgate Place, Canaletto, the Lexington Apartments and Goodman Fields. One bedroom apartments have seen highest demand across the City and at times we have had shortages, so with demand outstripping supply, asking rents have risen slightly. Our Canary Wharf branch has had another good year and the market for smaller, one bedroom apartments (£325 – £400 per week) is thriving.  These generally have been letting within two weeks or so. Above that price point, two bedroom apartments have been a little slower to let as there have been more on the market and a greater choice for tenants. The development which has had the greatest impact on the Canary Wharf lettings market this year has been Lincoln Plaza and we have seen high demand here, with applicants loving its high spec, superb amenities and stunning views.

Wapping is popular with professionals working in the City and we have seen strong demand for 21 Wapping Lane which is close to Canary Wharf and only a short tube ride from the City itself. The launch of the first phase at the brand-new London Dock development in Wapping where we have an on-site lettings branch, is due to complete at the end of this month and this is creating a lot of interest amongst applicants, in fact, we already have a waiting list for the first apartments and will be conducting viewings in the coming weeks so if you have a property at London Dock please get in touch with our lettings team as soon as possible.

A trend we are seeing across our East London offices is the move by tenants towards longer tenancies. In 2015 most tenants would take a standard one year tenancy but now many are asking for two or even three year tenancies as they opt for greater stability – this is good for landlords who benefit from the stability of a longer term tenancy and a continuous, reliable income stream.

South West central London (Imperial Wharf and Nine Elms)

Three bedroom apartment at The Tower, Chelsea Creek

Our branch at Fulham branch at the Imperial Wharf property development has enjoyed another very successful year, with transaction levels up by 12.3% over 2015 and properties across the development letting consistently quickly throughout the year when offered in tip-top condition. Much of this very high demand has come from professionals relocating to the development from overseas and from wealthy international students.  Renewals are also high as, once tenants have moved here, the location and amenities mean they rarely wish to move elsewhere unless they leave the Capital. At adjacent scheme, Chelsea Creek, demand has also been good despite higher rentals, with the launch of The Tower attracting a lot of enquiries. The luxury spec of this building, together with its incredible views, have made it a favourite with applicants coming in to work or study in London, particularly those from the Middle East, Asia and Europe.

We opened our sixteenth office in Nine Elms this Autumn, in perhaps one of London’s most exciting new areas of regeneration, just south of the River Thames.  Interest in the Nine Elms Point property development, where our branch is situated on-site, is really building now that Sainsbury’s have moved in and of course, the location is very close to central London and provides a luxury lifestyle by the river at Zone 2 rentals.

Further brand new apartments will be completing soon at Battersea Power Station and we expect demand to be high from professionals. Technology giant, Apple, recently announced they will be setting up their UK headquarters here hosting 1,400 staff and this has really brought a renewed interest to this 42-acre site. If you have a property to let soon in the Nine Elms location, please contact us as we anticipate demand to outstrip supply in the first quarter of 2017.

South East London (Greenwich and Surrey Quays)

Surrey Quays branch at Marine Wharf

Greenwich’s popularity continues to grow and this year we have seen rental demand increasing still further as applicants discover the area.  We have had waiting lists for one and two bedroom properties at some points during the year and are actively looking for more stock.  New homes at Greenwich Peninsula have been well received by tenants and we have received high numbers of enquiries for properties here. We have also had a very good response to new apartments at Royal Arsenal Riverside in Woolwich and again, properties have been letting here within two weeks at most. We opened our new Marine Wharf branch at Surrey Quays in January 2016 and enquiry levels have been strong from the outset, increasing month on month.  With price points slightly lower than central Canary Wharf, the development is becoming very popular with applicants looking for excellent amenities in a location close to the City, Canary Wharf and central London. With demand building, we are looking forward to the launch of the next two phases, Mariners Wharf and Endeavour House in 2017.

If you have a property to let in any of these areas, or would like a free no-obligation rental valuation of your property please do get in touch with us. For more London rental market news and updates, subscribe to our newsletter.


About the Author

For 40 years Anita has been the driving force behind Benham and Reeves’ success as it has grown from a single branch in Hampstead, to one of central London’s oldest, independently owned sales, letting and property management companies. Anita's vision has driven the expansion of the business to offer a complete range of property investment related services from under one roof, from purchase to handover, furnishings and/or refurbishment to lettings and property management. Read more about Anita Mehra here - Read full profile