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London Tenants Seek Value Outside Traditional Hotspots

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A rising tide of BTL stock has upset the delicate supply-demand equilibrium in London causing rents to fall. However, the collapse in property values predicted by some commentators has (so far) failed to materialise.

In fact, demand for investment property in the capital remains firm as international investors take advantage of very attractive exchange rates.

The high level of stock has had an enormous impact on rental growth in the capital. Data from Cluttons reveals that, at the end of 2016, average rents across prime Central London had declined for five consecutive quarters.

“Prime central London remains a tenants’ market due to the high levels of stock that came onto the market in 2016, primarily in higher price brackets,” according to Knight Frank’s ‘Prime Central London Rental Index”.

It is interesting that the abundance of choice in the market is not driving tenants to negotiate deals in prime or super prime districts. Rather, tenants seem to be showing almost no geographic loyalty and are influenced by price, rather than location. According to Cluttons, “the amalgamation of rents across Zone 1 is likely to continue chipping away at the geographic supremacy of some prime central London submarkets.” They went on to say that “one of the few exceptions is St. John’s Wood, which continues to attract families looking to place children in the American School.”

Source: Cluttons ‘Residential Market Outlook: London, Winter 2016/17’

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