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Record rise in London rents

Monday, 2 July 2007 12:00 AM

Rents in central London have risen at record levels, figures out today reveal.

Knight Frank's London lettings index finds average rents rose 4.2 per cent between April and June 2007, the largest rise since records began in 1995.

In the last 12 months rents are up 12.2 per cent, which is the highest annual rent inflation since 1995, the estate agent reveals.

The highest rises in central London rents over the last quarter were in Notting Hill and Kensington, where rents were up by 6.1 per cent, mainly due to a lack of properties pushing up prices.

However, in some "outer prime locations" such as Canary Wharf and Wapping rent inflation is even higher hitting 7.6 per cent in the last quarter and 14 per cent over the last year.

"Recent strong rental growth has been accredited to the shortages of stock in the marketplace," commented Liam Bailey, Knight Frank head of residential research.

"It is our experience that some landlords are continuing to sell properties to take advantage of high capital price growth, and also to reduce their exposure to higher interest rates."

He added: "Houses continue to be the main driver of rental growth in these markets as families seek to relocate with minimum disruption to the school calendar."

However, Knight Frank explains the record rental rises do not necessarily mean record profits for landlords.

"Yields in prime central London have dropped to an all time low," Mr Bailey said.

"Gross yields stand just above four per cent after exceptional growth in house prices this quarter. Although rents have grown strongly since the start of the year, capital value growth has overshadowed the performance of the rental market. We anticipate that over the coming months rental growth will catch capital value growth as the sales market slows over the summer."

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