Member Article

Brexit fears see prime London rental growth stall

Rental prices in the capital are starting to feel the jitters of a potential Brexit vote ahead of June’s EU referendum, according to figures released today by property consultants at LCP.

The figures, drawn from LCP’s prime central London portfolio, show a stagnation in both new lets, which are newly refurbished properties, and re-lets, which are older properties being let to new tenants, for the first quarter of the year.

Re-lets were hit the hardest, with rental values falling 1.2% this quarter, which LCP claim is fuelled by a glut of new properties that have come on to the market, with stock over 26% higher than the previous quarter.

On the other hand, New Lets registered a tiny 0.3% growth in rents since January, made all the more damning when compared to the 5.5% average growth that rents for newly refurbished properties have experienced since January 2015.

Chief Executive Officer at LCP, Naomi Heaton, believes the threat of Brexit, along with falling oil prices and global economic jitters is creating a market eerily remensicent of that during the Credit Crunch.

She said: “The overall suppression in rents reflects a market dynamic which was conspicuous during the Credit Crunch, as tenants capitalise on economic uncertainty to leverage up their bargaining power.

“This has been compounded by companies cutting their relocation budgets in the face of global instability and, in some cases, delaying relocations in the run up the EU referendum.”

However, some areas have batted back the general gloom and experienced some impressive rental growth, with Marylebone, Fitzrovia and Mayfair, achieving an average rental increase of 10.6% for one bed flats and 12.8% for 2 bed flats over the last 6 months.

The figures mean that it is very much a tenant’s market at the moment, as economic conditions and the political climate temporarily force down rental values.

“For tenants with the flexibility to move, now is the optimum time to secure the best deal, before rents, in all probability, harden post-referendum.

“Landlords may also seek to recoup the increased tax burden they will suffer due to increased entry costs with the Additional Rate Stamp Duty and the reduction in mortgage interest relief.

“Landlords can, therefore, expect an improved picture next year as the market rallies and rents increase to counter the tax and Brexit headwinds,” Heaton concluded.

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →