Prime central London rents fell by 0.4% in July

• In Prime central London rents have fallen by 2.7% annually but they remain 21.3% above their financial crisis low

• The number of applicant viewings is up year-on-year, by 6.8%

• Rents for properties in Marylebone, Kensington and Belgravia have risen in 2013 by 1.7%, 1.6% and 0.1% respectively

• Rents in prime central London declined again in July, but despite recent falls, they remain 21.3% above the low point they reached in June 2009. 

Rental performance has been weaker for larger and more expensive properties, with greater resilience being displayed at the more “affordable” end of the market.

Over the past month rents have fallen more for houses than for flats, with a -0.6% and -0.3% decline respectively.

Rental falls have also been more notable in the £1,500+ per week bracket than in the £500 to £1,500 per week bracket this year.

Despite the ongoing decline in rents, activity levels across the prime central London rental market remain buoyant this year.

The volume of tenancies agreed over the year-to-date is 32% higher than in 2012.

Additionally, the number of applicant viewings is up this year, by 6.8%. This increase in activity reflects a broader shift in favour of the rental sector across the UK, due in part to the lack of mortgage market funding for new entrants in the owner-occupier market.

The main factor weighing on rents, especially at the top end of the market, continues to be the health of the London economy.

The ongoing Eurozone crisis has put downward pressure on growth, confidence and recruitment in the city.

Data from financial sector recruitment specialist Morgan McKinley indicated that in the three months to July 2013 there was a gradual rise in job availability month-on-month. But, while this is positive news, it is worth noting that job opportunities remain at a lower level than the same period of 2012.

While the headline figures confirm that rents continue to fall, we are seeing differing price performance across areas. Rents in Mayfair have declined by 4.2% since January. In St John’s Wood and Notting Hill average rents have also slipped in 2013 by 3% and 2.1% respectively.

In contrast, rents for properties in Marylebone, Kensington and Belgravia have risen so far in 2013 by 1.7%, 1.6% and 0.1% respectively.

Our view remains that it will be 2014 before we see more robust rental growth, however this will require a sustained improvement in central London job creation.