Upbeat look to prime London lettings as year draws to a close

Knight Frank has issued a relatively upbeat assessment of the prime London lettings market as the year draws to a close. 

Firstly average gross yields in prime central London have risen over the course of 2018 as a result of rising rents and downwards pressure on prices. A yield of 3.35 per cent in December was the highest since April 2012 - this agency says this compares favourably for investors to, for example, the yield on a 10-year UK government bond of less than 1.3 per cent in early December. 

“There has been similar upwards pressure on yields in prime outer London as rental value declines bottom out. An average gross yield of 3.5 per cent in December was the highest recorded since March 2015” explains Tom Bill, the agency’s head of residential research for the capital.

He says lettings activity across prime London markets has been relatively resilient despite the uncertain political backdrop. Bill says: “The number of new tenancies agreed in November was 12.3 per cent higher than the same month last year while the number of new prospective tenants was 2.0 per cent higher.” 

Meanwhile falling supply continues to put upwards pressure on rental values as landlords attempt to sell following recent tax changes. 

Despite a recent reversal of this trend as some owners failed to achieve their asking price, there were 12 per cent fewer new listings in the year to November than the previous 12-month period in PCL.