House prices in central London have slipped since July and research by Knight Frank for Q3 2010 has revealed that, despite the continuing resurgence in the lettings market, rents remain 7% below the market peak of March 2008.
Nevertheless, the growth in average rental prices has been far outstripped by average earnings in London, with average rents rising 13.5% in the last decade compared to a 42% increase in average incomes in central London.
Liam Bailey, head of residential research, Knight Frank, said this should give landlords confidence in the sustainability of the market.
He said: “Landlords should not become overly confident regarding the potential for rent rises in the short term. While further growth is possible, there are signs in the lettings market that the demand and supply balance is becoming less favourable for investors.”
Yet, Bailey highlighted that the volume of properties available for rent remains lower than it has been historically. The number of newly available properties in September 2010 fell 6% year-on-year and 36% on September 2008, when the market saw huge oversupply from ‘forced landlords’ and rents being forced down as a result.
Bailey said: “Demand for rental property has been very strong, with new applicant volumes between May and August running at around 10% above the levels seen in either 2009 or 2008.
“September saw this level decline, with new applicant volumes falling back noticeably by 14% compared to the level in September last year. The same was true of viewing figures, which again fell back in September after strong results throughout the summer period.”
