Earlier this month, we reported a flattening out of central London house prices in line with other research reports. A shortage of mortgage products, changes in capital gains tax legislation and a general stagnancy in the creation of city jobs have all had negative effects on house prices. These factors should be placed against the continuous growth in the international demand for prime London property, a shortage in luxury one bedroom & family houses, expected drops in the London interbank loaned rate (LIBOR), a continuous halo effect surrounding the 2012 Olympics and more importantly a steady growth in the rental market.
Although recent reports show a 1.5% drop in the prime central London sales market, the first quarter 2008 rental sector shows different results- at least in the very marketable one-bedroom property category. Our research based on data of one bedroom properties let in London’s W1 show a rent increase of 3.4% compared to 2007 figures. We analysed 38 one bedroom properties located in London’s Mayfair and Marylebone that were let in the first quarter of 2007 and re-let succesfully in the first quarter of 2008. Twenty eight of these properties recorded identical prices or stable increases that ranged from 0% to 11.6%. We also noted that ten of these properties recorded drops of up to 10%.
Overall we believe that the rental market will fair well in the second quarter of 2008. Demand for prime central London rental property in 2008 will depend on the continuous influx of professionals in the legal sector, from international students and from potential buyers who are unable to get immediate finance. We will be carrying further research on larger properties in the prime area over the next two weeks.
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