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Rental values in the prime central London property market continued their recovery in February, recording their twelfth consecutive month without a decline, the latest research shows. An increase of 0.2% matched the rise in January and took annual growth to 4%, which was the highest level in more than three years, according to the report from Knight Frank. It points out that as May’s general election approaches, there is a degree of uncertainty in the sales market that has dampened activity due to the potential of a ‘mansion tax’ on properties worth more than £2 million. ‘This has benefitted the lettings market to some extent as a small but growing number of buyers and vendors hedge their bets on the outcome of the election and move into the rentals market. However, the dominant mood in the prime central London lettings market in February was also one of caution as election campaigning gathered pace, which resulted in low stock levels in some areas,’ said Tom Bill, head of London residential research at Knight Frank. He pointed out that in higher value price brackets, the mood of caution has led some landlords and tenants to explore option to buy agreements where it is mutually beneficial. ‘Though not prevalent, there is anecdotal evidence to suggest tenants have explored the try before you buy option in order to hedge against short term political uncertainty, enabling them to initially rent and buy once there is greater clarity surrounding the outcome of the election,’ he added. A breakdown of the data shows that there is some variation in rental values. In Mayfair they have declined by 1.6% and in Islington by 1.2% in the year to February 2015. Chelsea has seen a 0.2% rise and Knightsbridge a 0.5% rise while in Notting Hill they increased by 1.5%. In Belgravia rental values were up 2.7%, in South Kensington by 6.1%, in Kensington7.8%, and in Hyde Park there was growth of 8%. While St Johns Wood and Marylebone saw the highest rises at 10.8% and 12.4% respectively. The report also says that despite the hesitancy, there are grounds for optimism, including the fact new tenant registrations, viewings and the number of tenancies agreed remain strong. The buoyancy of world stock markets in February is also likely to underpin demand. The performance of the prime central London rental index has broadly tracked global stock markets in recent years and the current record levels being set, including by the FTSE100, suggest the positive upwards momentum will continue. The recent strong performance is linked to indications from the Federal Reserve that it will not rush to raise interest rates, the low oil price and the agreement between Greece and the euro zone, among other factors. Continue reading →
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