Wealthy tenants demand prime rental units ‘with highest spec’

A prominent lettings agency is advising landlords to fit out homes in prime locations to the same high specification as if they were being sold.

Knight Frank says global ultra-high net worth individuals like the non-permanence of renting and super-prime lettings properties are often in direct competition with London’s luxury hotels for that reason. 

This trend may be turbocharged if Labour wins the next General Election and carry through with its pledge to overhaul the non-dom tax regime as well increase the surcharge for overseas buyers of residential property. 

As both represent risks for the prime central London sales market, Knight Frank urges landlords to step up and take advantage.

“If ultra-high net worth individuals need to subsequently relocate, they won’t be worried about how property prices have performed or the fact they have forked out 17 per cent in stamp duty, which can be the equivalent of four or five years’ rent. These tax changes have pushed up demand in recent years, which means landlords need to specify their property to the same high standard as they would if it was being sold” says the agency’s research chief, Tom Bill.

Landlords that follow this advice can expect to achieve higher investment yields, given the rarity factor at the very top of the market, adds Bill.

More generally, Knight Frank says the best way to describe the performance of the high-value London property market in recent years would be ‘reassuringly uneventful’.

Buyers and sellers in prime central London have lived through a global pandemic, a stamp duty holiday and the fact five-year fixed-rate mortgages quadrupled in the two years to July 2023. The result, says the agency, is that average prices grew only 0.7 per cent, reflecting how successive lockdowns and international travel restrictions took their toll. Over the same period, the Nationwide UK index increased by 12 per cent.

However, relatively flat prices mean more owners have chosen to rent out their property rather than sell, which has driven up the number of so-called super-prime tenancies.

These are classified as tenancies above £5,000 per week in central and north London and higher than £15,000 per month in south-west London.

Bill continues: “Property owners at higher price points are more discretionary and when they look around at what’s been happening in the sales market, many have gone down the rental route.”

The number of new listings above £1,000 per week in London increased by 30 per cent in 2023 compared to the previous year, Knight Frank data shows. Below £1,000 per week, there was an equivalent rise of just 0.5 per cent.