The prime central London buy-to-let market is showing growing signs of recovery as rental values dipped by just 0.1% in the three months to September, which was the smallest quarterly decline in almost two years.
According to Knight Frank a fall in residential letting stock in the heart of London is starting to place upward pressure on rental values, which are down 3% year on year making it the most modest decline since June 2016.
The report analyses the performance of single-unit rental properties in the second-hand prime central London market between £250 and £5,000 plus per week. The findings showed that the volume of properties coming onto the market between January and August was up just 2.2% year on year, compared to an equivalent jump of 33% between 2015 and 2016.
Higher supply in prime central London had been fuelled primarily by slower activity and pricing uncertainty within the sales market following a succession of tax changes, which led to more owners deciding to let rather than sell.
However recently, the availability of rental homes has become more muted and demand has risen. This trend has started to reverse as asking prices adjust and demand improves.
“The imbalance between new levels of supply and demand suggests the market balance is likely to tip back in the favour of landlords after a period when tenants have benefitted from higher supply levels and falling rental values,” said Tom Bill, head of London residential research.
While there are fewer buy-to-let mortgages issued in the UK than before a 3% stamp duty surcharge was introduced last year, Knight Frank data shows there was a 9.8% increase in the number of landlords who re-let their property in prime central London in the year to August 2017, which according to Bill underlines the fact “there has been no large-scale exit from the buy-to-let sector”.
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