LONDON RENTAL MARKET AT 10 YEAR HIGH

London rents are at their highest for 10 years, reports Hurford Salvi Carr, specialist estate agent in the City, Docklands and West End. According to the company’s Half-Year report, broadly rising rental values over the past four years have accelerated in the last 18 months to set average values at an all-time high and to keep investment returns at an acceptable level.

Hurford Salvi Carr reports that in the first six months of 2007, residential rents across the City and Docklands’ markets rose by 7% taking typical weekly rents to £490 for a two bedroom apartment and £375 for a one bedroom apartment. Taking into account the effect of inflation, these prices are at their highest for 10 years, with further increases expected in line with the Retail Price Index.

A shortage of housing supply is the most commonly recognised contributor to this price rise in the London rental market, a fact that is compounded by longstanding tenants who would traditionally have been able to move onto the property ladder more quickly. David Salvi, Director of Hurford Salvi Carr comments, “Price rises and increased borrowing rates have made it more difficult for tenants to become owner occupiers. This is a result of price rises and increased borrowing rates, but is also down to other factors, such as the growth of the serviced accommodation sector and the student market competing to purchase investment properties off plan and prior to general release.”

The transient business communities in the City, Canary Wharf and London’s ever-growing student population in the West End, are also cited as contributing to price rises in the rental market. Kari Trajer, Lettings Manager at Hurford Salvi Carr comments, “Serviced accommodation providers and upmarket student accommodation are creating strong competition for rental stock across the City and Canary Wharf.”

According to Hurford Salvi Carr, demand now outstrips supply so heavily in the London rental market that ‘sealed bids’ have become an established feature on the Assured Shorthold Tenancy (AST) market. Some properties prove so popular that they are let even before the brochure has been printed, as happened when Hurford Salvi Carr recently marketed four refurbished apartments at Bedford Place, WC1.

As a result of this frenzy, rental prices in the capital are now so high that typical weekly rents for a two-bedroom flat exceed the AST legal ceiling of £25,000 per annum or £480.77 per week. Kari Trajer comments, “The Assured Shorthold Tenancy was once the backbone of the rental market but is now no longer sufficient to cover the rental values of many properties. Landlords must be wary of this. If the rent exceeds the legal ceiling of the AST, then alternative lease agreements must be used if landlords are to avoid costly disputes with tenants. “

All lettings consultants at Hurford Salvi Carr are ARLA qualified and can advise landlords and tenants on aspects of the AST and the newly introduced Tenancy Deposit Scheme.