Small flats lead lettings revival
While the recovery in London's residential sales market has centred on strong demand for large houses, small flats are the star performers in the lettings sector. Overall, rents have stopped falling in prime central London, letting agents say.
According to estate agency Savills, rents have risen 10 per cent for one-bedroom flats let to corporate tenants in east London's Docklands and Wapping districts over the past 12 months.
This meant they had recovered from last year's lettings slump, said Jane Ingram, national head of lettings at Savills.
'At the bottom of the market, typically they [one-bedroom flats in Docklands and Wapping] were letting at GBP320 (HK$3,961) per week, but now they are letting at GBP370 per week,' she said.
'In some cases, they are nearly the same price as a corporate two-bedroom flat. We believe these one-bedroom flats are back to 2007 prices.'
Rents are rising for small flats let for between GBP450 and GBP550 per week in Islington, she added.
Rents have risen for small flats because cuts in corporate accommodation budgets mean staff are looking for one-bedroom or two-bedroom homes instead of the larger properties they sought before the credit crunch.
In addition, many potential first-time buyers have opted to rent during the sales slump, pushing up demand for rental accommodation further, Ingram said.
Strong demand for small rental properties in areas close to the City of London and Canary Wharf financial districts means rents have stopped falling in prime central London overall.
However, the lettings slump continues for large homes in prime central London areas such as Mayfair, Knightsbridge and Kensington. Ingram said rents for family homes in these areas were 15 per cent below market peak levels of 2007 and were continuing to fall, though more slowly.
A four-bedroom town house in Chelsea, a typical type of rental house in that part of London, now lets for GBP2,000 to GBP4,000 per week, she said.
Savills forecasts that prime central London rents will fall 3 per cent to 4 per cent overall next year because of ongoing economic uncertainties, with the market for smaller homes continuing to do better than that for larger properties.
While a small number of British landlords are selling homes during the sales market upturn, particularly those who had let out their own homes reluctantly during the slump, Hong Kong landlords are holding on to their properties, Ingram said.