Rental Prices in London Expected to Rise in 2014

In news that will spell celebration for landlords, yet misery for would-be tenants, London rental prices are expected to rise during 2014.

However, this rise will come at the end of an 18 month period where prices have either fallen or remained stable.

The figures and predictions come from the Prime Central London Rental Index from Knight Frank which shows that overall rents for the various London Borough's fell by 0.3% in November 2013.  When added to the overall figures for 2013, it is clear to see a total drop of 2% in the rental income.

However, the firm remains confident that this latest drop simply means that prices are primed to rise in 2014.

Demand

Tom Bill, an Associate for Research at Knight Frank discussed the future, saying "Demand for rented accommodation in London is certainly on the rise. The number of new lettings in the year is up 18% on the previous 12 months, while new viewings and applicants were up by 8% and 9%, respectively,' said Tom Bill, associate for rental research.

Mr Bill also highlighted the links between the performance of the London rental market and the overall economic picture, discussing that although the financial sector has suffered losses in recent time, there is still optimism.

He pointed out that poor media portrayal of the major financial institutions, together with mass redundancies help to explain why London rental prices have seen little growth in 2013, but says that this pressure should lift in the New Year.

The firm's prediction that rental prices could rise by up to 2% throughout 2014 could be attributed to improvements in the overall financial sector he explained, "this downwards pressure should ease next year when we expect rents to rise by 2% in prime central London, fuelled by job creation and increased economic optimism in the City. As a result, we expect prime central London rents to outperform other markets over the medium term, rising 18% between 2014 and 2018 versus 16% in the UK and 17% in prime outer London."

British Industry

Mr Bill went on to discuss growth for jobs in London which has a direct effect on rental prices and the overall market. This is according to the Markit Economics Report on Jobs which stated that London based recruitment agencies had improved on the numbers of permanent employees they had placed for the fifth month in a row.

Discussing the correlation between the two figures, Mr Bill said "The improving data on the London economy is positive for the rental market where the index is still only 5% below its all time high in September 2011 and a fifth higher than the Post Lehman low in the middle of 2009. While bank employment remains under pressure, demand is emerging from alternative sectors including technology, media and telecoms and the legal profession."
It is also worth mentioning that whilst the overall and average rents have fallen, there have been improvements in areas such as Hyde Park and Marylebone, both of which have seen significant rises in average rents throughout 2013.

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