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London rents to grow

A significant upwards spike in residential rental income in Prime Central London is expected this year, according to a new report from Savills. ‘We see this year as a turning point for residential rents, and expect to see a spike by the end of the year,’ said Lucian Cook, Director of Savills research.

Rental yields in London have been falling, relatively to growth trends in capital values, to the point where a market correction is now due, said Mr Cook. With a very limited amount of freehold supply in Prime Central London and continued capital growth forecast, Savills fully expects demand to flow into the rental sector.

‘The continued expansion of London as the world’s major financial centre and the associated growth in employment figures in the City are strong drivers for growth. There is an increasing demand from young well-paid executives for whom renting is a viable alternative to purchase,’ Mr Cook continued.

The potential for further growth is reflected in the level of optimism shared by letting agents who are expecting accelerated rental growth in the spring and summer of this year – at the top end of the prime sector, where rents average more than £1,500 per week, Savills says it anticpates annual growth of at least 12%.