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Prime Property Rents in London Are Down in Numbers

Posted by Aliza Xandria Arellano on Feb 03, 2016 11:39 AM EST
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LONDON - DECEMBER 06: A general view of the Bank of England on December 06, 2006 in London, England. (Photo : Gareth Cattermole/Getty Images)

Based on the recent survey, the residential rents all across the prime property market in London increased by 1.3 percent for the year 2015. As for the areas near the commuter zone, it rose by 0.6 percent.

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Furthermore, the new report from Savills, as published by PropertyWire, said, "In London, the relatively high levels of supply coming into the market, from different investment buyers of an increasing volume of new build stock but also from the re-emergence of accidental landlords, who reflect a more heavily taxed and generally less active sales market."

According to the same report, London's smaller properties were among the best performers, particularly rents for one-bedroom homes, which rose by 3 percent in the year. However, rents for four-bedroom houses did not increase much, rising by just 0.1 percent on average.

For areas where the housing markets are near commuter zones, the rental values of these prime properties have shown resilience and growth in comparison to other areas. 

Moreover, Lucian Cook, Director of Savills residential research, stated, "From an investment perspective, this meant smaller, less expensive properties clearly delivered the best returns. In addition to stronger rental growth, they offered better income yields and capital values proved more robust given less exposure to higher rates of stamp duty."

It seemed that the newly implemented tax policies have influenced the housing sector in the region and the additional stamp duty may have directed investor demand towards areas with less expensive units that deliver higher yields, according to savills.co.uk.

At the same time, Cook further added, "In 2020, we expect the cost of mortgage debt to have risen, we have assumed a 4.5 percent mortgage interest rate, and income yields to have fallen because we expect price growth to exceed rental value growth in the next five years. Both of these factors would suppress the rental cash surplus deliverable from the same properties."

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