Rents down but demand up - is London's lettings market stabilising?

Foxtons reports that average rents continued to fall across many parts of the capital in the second quarter of this year, although demand for rental properties increased.

The agency says this helped slow the pace of decline in rents and might signal the beginning of a long-anticipated stabilisation in the London rental market.

The firm - which has 67 branches, almost all in London - says the appeal of Zone 1 appears to be strengthening as there were more central London searches made on its website in the second quarter of the year than in the first, while Zone 2 maintained the highest level of demand. 

It says domestic renters continue to comprise the largest proportion of all London tenants at 39 per cent while the proportion of renters from Asia and the Middle East saw a significant increase to 13.1 per cent in the second quarter.

“We've spoken before about how the lettings market traditionally benefits from uncertainty in the sales market, as potential buyers turn to the flexibility offered by renting” says Ed Phillips, Foxtons' lettings managing director. 

He says there was a 3.3 per cent increase in the average number of renters registered with Foxtons for every new property instructed in Q2 - enough for Phillips to suggest this might mark a more stable period for the market. 

Other findings from the agency’s latest report include a decrease in total annual returns on rental properties to an average of just under 10 per cent. The most significant fall in rents in the second quarter was seen in Zones 3 to 6.