London lettings not providing homes for ordinary Londoners

Sarah Dunsby

Source: ©Photoshot

According to a new report

There is a significant lack of supply of low-cost smaller flats for rent across London’s West End, yet an abundance of larger properties and luxury lets, resulting in longer commuting for young city workers and suppressed luxury rental-value growth says new research bespoke estate agency Rokstone.

Analysing listed rental properties over the last six months, the Lettings Division of Rokstone calculate that less than 30 per cent of West End lettings are for studio, one and two-bedroom flats priced from £500 to £1,200 per week, with studios and one beds being in extremely short supply.  West End, defined here as Mayfair, Marylebone, Fitzrovia, Soho, Hyde Park Estate and the southern border of Regent’s Park.

In contrast, 70 per cent of West End lettings are for larger properties and luxury residences priced from £2,500 to £20,000+ per week. Rokstone say that the imbalance at the top end of the lettings market is being driven by increased supply from new build properties, accidental landlords unable to sell and the three per cent rise in Stamp Duty for buy-to-let landlords.

Currently around 60 per cent of the firm’s luxury lettings stock priced above £10,000 per week is property that developers ideally wanted to sell, but have chosen to let in order to generate income.

Rokstone say that for property up to £1,500 per week the key locations of supply are Marylebone, Bayswater, Fitzrovia and Soho.  For the £1,500 to £5,000 per week band properties are typically available in Soho, Fitzrovia and the Hyde Park Estate. For £5,000 per week plus the key locations are Knightsbridge, Belgravia, Mayfair and Regent’s Park.

Rokstone highlight that in a more balanced market, there would be a 50 per cent / 50 per cent split between the lower and upper lettings sectors, so there has effectively been a 20 per cent drop in the supply of entry level flats matched by a 20 per cent rise in premium rental properties.

For the £500 to £1,200 per week sector of the West End lettings market Rokstone highlight that tenant demand is being driven by executives working for high-tech and media companies and overseas students from wealthy families. The tenants are a combination of domestic British people and also overseas people from America, Canada and the Middle East.

For the £2,500 to £20,000+ per week sector of the lettings market the tenants are typically Chief Executives of public companies or firms they own, wealthy socialites and celebrities/movie people working or promoting themselves in the capital.

Some are from the UK, whilst the largest groups of overseas tenants in the luxury lettings sector originate from North and South America, Turkey and Asia. Rokstone say that Asian tenants are particularly active in the West End at present, particularly from Hong Kong, Singapore and Japan.

Rokstone reveal that the current stock imbalance in the Prime London rental sector is impacting on the market in various ways. Firstly the lack of smaller, lower priced, studio, one and two bedroom apartments means that these type of properties are let extremely quickly when they come onto the lettings market.

Olivia McSweeney, Rokstone Head of Lettings, says: “There is a significant pent-up demand for entry level rental properties across London’s West End priced from £500 to £1,200 per week. Studio and one bedroom flats, if priced and presented well, can let within a few days.”

Rokstone say that the rise in supply of luxury lettings has provided both challenges and opportunities.

Olivia McSweeney said: “For luxury lettings properties – especially those priced between £5,000 to £20,000 per week – the owners/landlords want their property managed and maintained as a luxury product, and they look to us to carefully source and educate the tenant about the quality of the home they are moving into.”

McSweeney continues: “On the supply side, we are offering landlords our bespoke home dressing services and also organising beautiful professional photography and marketing collateral for the properties. The sales sector of the property market does branding and marketing extremely well, historically the lettings sector has often neglected this important client-care and product presentation function.”

McSweeney adds: ”On the demand side, our Lifestyle Consultancy department provides tenants of ultra-prime luxury lettings property with assistance with neighbourhood orientation, party and event planning, sourcing designer products from shops and booking tables at London’s most exclusive restaurants.”

Rokstone calculate that over the last year the luxury end of the Prime London lettings market has seen rents cool by between 2per cent to 5per cent because of the current supply imbalance.

Stock levels are likely to suppress luxury rental growth in the mid-term. However at the entry level, lettings values and demand have remained extremely strong, and Rokstone anticipate strong continued demand from wealthy students and young affluent households facing a significant deposit-hurdle to buy their first home.

Becky Fatemi, managing director of Rokstone said: “Currently around six out of 10 enquiries I am getting from my property developer clients is asking us to provide them with bespoke lettings services for luxury property they are holding on their balance sheets.

Fatemi continued: “Whilst the luxury lettings sector is well supplied, it is the entry level part of the lettings market in Central London that is massively undersupplied. Landlords and professional build-to-rent developers need to be targeted and looking at supplying the lower end of the lettings market since this is where there are really lucrative opportunities at present.”

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