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Prime London rental market 'thriving'

Wednesday, 15 March 2006 12:00 AM

Central London's prime rental market is beginning to thrive for the first time since the dotcom bubble burst, according to a new survey.

Nearly half of letting agents are reporting more tenants than properties during the first quarter of 2006, says the Association of Residential Letting Agents (ARLA).

This renaissance is seen as an expression of confidence in London's financial sector and is expected to have a positive ripple effect on rental markets outside of the capital, which is good news for buy-to-let investors.

ARLA's latest quarterly survey shows that the most expensive areas in London have seen a tenfold increase in the balance of demand - number of tenants versus available properties.

In 2002, only five per cent of ARLA agents believed there were more tenants than properties, but in its latest survey this has risen to 48 per cent.

Rents have also risen significantly during the last six months, with up to 55 per cent of all ARLA member letting agents reporting rent levels on the increase across all types of property.

Average weekly rents for prime central London properties are now £602 (£2,610 per month) for a house and £405 a week for a flat (£1,754 per month) - one third higher than the rest of London and more than double the rest of the south-east.

"Much of this London market is driven by the financial sector, so not only is this a sign of confidence in London but the ripple effect should have a major impact on rental markets away from London," said ARLA chief executive Adrian Turner.

Rental returns in central London are proving to be higher for flats than houses, with figures of 5.1 per cent and 4.8 per cent respectively.

This picture is repeated across the south-east with returns from flats at 5.4 per cent and from houses at five per cent.

The survey is further good news for London property markets, following figures from estate agent Knight Frank showing that prices of prime London property in February were 11.7 per cent higher than the same time last year.

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