The year has started on a positive note for both the Central London sales and lettings markets with increased levels of activity recorded across both divisions. However, despite the three year anniversary of historically low interest rates at 0.5% a growing sense of realism has been witnessed during the first quarter. This caution has stretched to the upper end of the market which remained largely immune in 2011, impacted by the ongoing economic uncertainty.
That said, forecasts for both markets remain positive for 2012, although a growing divergence between prime and secondary product is projected to emerge within the sales market throughout the year. The Olympic Games will be the key driver behind forecast growth within the lettings market.
PRIME CENTRAL LONDON LETTINGS MARKET
Despite a continuing shortage of stock, in line with the sales market, the Central London lettings market has witnessed a more buoyant start to 2012 compared to a muted end of 2011.
However, the market remains sporadic. The mid range market (£700 - £1,500 per week) has witnessed a 5% rise in rental levels since year end, driven by an increase in applicant numbers against a restricted supply pipeline.
In contrast, a notable slowdown in demand and rental levels achieved for upper end stock (properties over £2,000 per week) has been evident due to a lack of enquiries. This slowdown has been initiated in part by an increasing sense of realism within the corporate market, the mainstay of the sub-sector. Whilst quoting prices have yet to formally reduce, landlords are becoming increasingly realistic in terms of value and are likely to accept between a 5-10% reduction compared to six months ago.
The £400 - £700 per week bracket continues to draw a steady stream of enquiries and tend to let relatively quickly providing product is well presented and realistically priced.
The Olympic Games has yet to impact the lettings market. Short-term lets typically command a premium of between 30 and 50% compared to long-term lets within the Capital although proposed increases of up to 300% have been quoted during the summer months. Demand for such lets is expected to be activated over the forthcoming months and will prove the key driver behind the 5-10% projected growth in rental levels across Central London during 2012.