Wealthy tenants act fast as London’s super-prime rental market surges in uncertain times
- By Bertie Russell
- 08 October 2019
Continued political and economic uncertainty is proving to be a boon for London’s super-prime lettings scene, as a hesitant sales market translates to strong rental demand at the very top end.
A total of 40 tenancies were agreed in London at above £5,000 per week in Q2 this year, reports Knight Frank – the highest figure for the period in more than seven years. 153 super-prime lets were agreed in the year to June – also the highest total in seven years.
“People are watching and waiting for the political situation to play out and some have decided to rent,” says Tom Smith, Head of Super-Prime Lettings at Knight Frank. “People tell me they want to remain flexible, not just because of Brexit but because of their concerns around global trade tensions and the state of the world economy.”
Rising spending power of American tenants
As in the sales market, the weak Sterling is giving London tenants with other currencies additional firepower. A dollar-toting US tenant with a weekly budget of £5,000, for example, has seen this grow to the equivalent of more than £6,000 since 2016’s EU referendum.
Traditional Golden Postcodes are still firm favourites amongst today’s super-rich renters. But there’s growing demand for high-value rental homes in alternative enclaves too.
Knight Frank has noted a particular penchant amongst US tenants for Notting Hill and St John’s Wood. The quality of schools in these areas is a strong draw, notes the firm.
Tightening supply drives speedy super-prime rental deals
The emergence of high-quality super-prime developments has also helped encourage the wealthiest tenants into old-school hotspots areas like Mayfair.
Wetherell’s recent super-fast let of a £30,000 pw apartment in British Land’s Clarges Mayfair illustrates this trend. The firm managed to find and sign-up a tenant – a “Millennial”, we’re told – for a 12-month contract within 24 hours of launching the two-bed property to market.
A super-fast £30,000 per week let was recently agreed in Clarges Mayfair, with a “millennial” tenant signing up to a year’s contract within 24 hours of the property launching to market.
The Mayfair estate agency says that it is the third super-prime lettings deal in just the last month to be sealed within 48 hours.
Tenants are having to move fast as competition is rife. Super-prime rental supply is tightening, says Knight Frank; the tally of new £5k+ pw lettings listings in London declined to 209 in the second quarter of 2019, compared to 284 a year ago.
PCL stalwart agency Russell Simpson has also flagged a series of “quick-fire” rental deals with stiff competition, including a penthouse on Redcliffe Square that attracted 15 viewings in just 48 hours and sparked a five-way bidding war. The apartment ended up being taken on a long let at 17% above asking.
JLL, meanwhile, has noted an interesting pattern of keen tenants going off-plan to get ahead of the competition in prime new-build developments.
The firm has nearly let the entire 64-unit Buckingham Green development by St James’s Park – from studios to penthouses asking over £5,000 per week – and recently reported that rising numbers of tenants are willing to “pre-let” their new homes in the rush to secure the best units.
“The shortage of supply, particularly for the most in-demand new-build developments, means there can be a premium for the rental values paid,” says KF’s Tom Smith. “There are several examples where this has pushed the rental yield to in excess of 4% in the best schemes, which is high by the standards of prime central London.”
Agencies turn to lettings as sales revenue slows
Lettings has become increasingly important for many upper-end London estate agencies as the sales market has slowed. Mayfair specialist Wetherell, for example, derived 70% of its turnover in 2017 from sales and 30% from lettings; now the target is for a 50:50 split.
It’s a similar story at Winkworth. The franchised agency reported last month that its rental income outweighed sales revenue for the first time ever in H1 2019 (53% from lettings; 47% from sales).
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