Following a recent spate of hyper growth – not least due to a number of central London property buyers resolving to rent ahead of the general elections earlier this year – the annual rate of rental growth in the prime central London property market in September was at its lowest level for 12 months.
This follows on from recent data published in October echoing concerns that property price growth in London has also reached its lowest level since the depths of the credit crisis in 2009. This is following a series of macro events and policy changes which are putting an affordability ceiling on property prices in London for many investors – notably as a consequence of the recent turmoil in global financial markets, increased stamp duty rates and changes to the non-domiciled tax status.
These are some worrying sequence of events as they have accorded in tandem with a slowing of central London rent growth to 2.4% in September as disclosed in a recent Knight Frank analysis. This all while rental yields in the capital have stagnated at 3% – already a low level when compared to yields across the UK. Further the number of agreed new tenancies is currently lower than during the same period last year which does not bode well for a strengthening of the rental market.
This makes one wonder if the London property market is beginning to reach its growth peak? There are however continued signs of resilience in the market which give further comfort – namely:
- The UK economy is still growing and growing at some of the fastest rates in the developed world;
- London’s economy, diversity and ability to create new jobs is attracting as many new citizens as ever;
- Economic conditions seem to be improving in continental Europe and the US (however, as we have detailed in our article on the changes in Chinese investor sentiment, there is some concern on the continued level of investment from Emerging Markets);