Knight Frank Prime London Lettings Index - Second quarter 2007 results

Growth in prime central London residential rents,
annualised rate hits 12.2% in the year to June.

Headlines this month

• Growth in average rental levels in prime central London hit 12.2% on an annualised basis in June 2007, the highest annualised rate since late 1999
• Quarterly growth hit 4.2% in the second quarter of 2007, the highest quarterly growth rate since 1995
• The highest rental growth is being experienced in outer prime locations such as Wapping and Canary Wharf – hitting annualised levels of above 14% in some locations
• Notting Hill and Kensington lead rental growth in central London with average growth of 6.1% in the second quarter lead mainly by the shortages of houses.

Knight Frank’s Head of Residential Research, Liam Bailey, comments:

“Rents in prime London continue to accelerate with growth of 4.2% in the second quarter of the year. This rental increase represents the highest quarterly growth in Prime London since the index began back in 1995. Recent strong rental growth has been accredited to the shortages of stock in the marketplace. 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.”

“In a sub market analysis, rents in Notting Hill and Kensington have increased by an average of 6.1% in the second quarter of the year. 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.”

“Outer prime rental growth marginally outperformed the prime central London markets with Wapping and Canary Wharf leading the way. These areas have, on average, increased by 7.6% in the three months to the end of June. One and two bedroom flats in the middle segment of the market are in strong demand as performance and recruitment remains buoyant in the City.“

“Yields in prime central London have dropped to an all time low. Gross yields stand just above 4.0% 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.”

Courtesy: Knight Frank Residential Research

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