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Annual rental value growth in the prime central London property market fell to 2.5% in August as demand remained subdued over, probably due to financial market jitters, a new report suggests. The analysis from international real estate firm says that as a significant proportion of tenant demand in prime central London derives from companies, in particular financial services, it should be no surprise that volatile global stock markets continued to affect sentiment in August. Rental values rose 0.1% from July, however quarterly growth was 0.2%, the lowest three month change since April 2014. Prime gross rental yields edged back up to 2.96% from 2.95% in July. Tom Bill, head of London residential research at Knight Frank, pointed out that there is a correlation between rental values in prime central London and the performance of the FTSE 100 and the recent stock market dip has been due to concerns over the state of the Chinese economy, with weak manufacturing data and the recent devaluation of the Yuan increasing nerves. ‘Despite the recent volatility, the devaluation should be seen in its historical context and China has several levers it can pull in an attempt to calm stock market falls that aren’t necessarily a reflection of its underlying economic health. The result is more subdued corporate activity and fewer relocation agents currently active in prime central London,’ he explained. He also pointed out that new tenancies in recent weeks have been UK based families that are moving from one neighbourhood of London to another. In the three months to July this year, the number of new applicants fell by 15% compared to the same period in 2014, while viewing levels were down 12.6% and the number of tenancies agreed declined by 12.1%. Meanwhile, the rentals market is still affected by distortions in the sales market following the general election, Bill also pointed out. ‘Some vendors have delayed selling and are exploring the rental option as they wait for stronger house price growth to return after a stamp duty increase in December for properties worth more than £1.1 million dampened growth,’ he said. ‘The result is more rental stock on the market, which has led to prospective tenants making offers on multiple properties, meaning deals are harder to finalise,’ he added. Continue reading →
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