London Super-Prime Lettings Insight

Demand across London has soared while supply has decreased ..

Knight Frank’s latest data on the London super-prime lettings market (£5,000+/week) shows that demand has accelerated while supply has fallen sharply. The result is that London has become a landlord’s market. Average rental values in prime central London rose by 2.8% in the three months to September, the largest quarterly increase in a decade.

Key highlights (Knight Frank analysis of LonRes data):

  • There were 45 super-prime tenancies agreed in Q3 2021, up from 34 in Q2. The overall number of super-prime lettings deals in the year to September 2021 was 147, compared to 123 over the previous 12 month period
  • A maximum rental value of £40,000 per week was recorded for Q3
  • August was one of the highest months on record for the number of super-prime lettings deals agreed by Knight Frank
  • Supply of new £5,000-plus per week listings is at its lowest level since Q4 2016
  • Knightsbridge, Kensington and Mayfair were the most popular neighbourhoods for super-prime tenancies agreed in the year to September 2021

Why is supply so low?

Supply remains low because:

  1. A number of owners sold in order to capitalise on a resurgent sales market over the last 18 months, producing fewer so-called accidental landlords
  2. Demand for high-value lettings property has been driven by the desire for more space following successive lockdowns
  3. Many sectors of the global economy, including finance, have flourished, over the pandemic, further driving tenant demand

These trends combined with other factors this summer to increase activity, according to Tom Smith, head of super-prime lettings at Knight Frank “A number of people in London were affected by flooding, which produced a spike in tenants needing a rental property for six to nine months. On top of that, people came back from holiday, there was a seasonal rush ahead of the schools re-opening and all that was happening just as international travel was kicking back in.”

Pre-lets and hotel stays on the rise

Supply is so tight that some tenants have resorted to signing pre-let agreements in order to secure the right property, something that Tom says has not previously been seen in the market. One recent super-prime deal in Kensington saw a family house undergoing complete renovation that was let six months before it was even finished, demonstrating just how strong tenant demand can be for sought-after properties. Tom Smith comments, “To get around the supply shortage some have acted ahead of time and secured tenancies on the back of design drawings and the track record of the developer.”

Others who have been unable to find the right property have agreed short-let tenancies or have booked into hotels, said Tom.

The super-prime short let opportunity for landlords

The imbalance between supply and demand has highlighted a gap in the market that existing and prospective landlords can take advantage of

Tom Smith comments, “I’m not sure clients and investors have woken up to the size of the opportunity in the short-let super-prime market in London. Irrespective of budget these searches are often really tricky given the lack of high-calibre turnkey options in the market geared towards stays of 30-90 nights.

“We’ve had a £20 million penthouse on our sales register that has sought to take advantage of this market whilst they look to attract a buyer. When it was made available for short lets there have been very limited periods when they have struggled to find tenants.”

Property examples

Property currently on the market marketed by Knight Frank is this bedroom flat in Holland Green, London – £11,500 Weekly

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