07 Feb Prime Home Counties rents down but demand remains strong
Rents for prime property in the Home Counties in England fell by 2.2% in the final quarter of the year, taking the annual decline to 3.6%, according to the latest index from Knight Frank. Rental values fell in most of the Home Counties lettings markets, with the exception of Cobham and Esher where rents were unchanged over the course of the quarter. The biggest decline came in Virginia Water where rents have fallen by more than 6% over the past three months.
However, despite the decline, demand for rented accommodation in the region remained high, with the number of viewings conducted across the market 29.5% higher year on year and the number of tenancies agreed up by 56.2% compared to the same period of 2012.
The performance of the Home Counties market is closely aligned to business confidence and demand from staff relocating to work in London, especially in the financial services sector or for one of the blue chip companies based in the Thames Valley, has historically formed a large part of the market.
The index report points out that while corporate demand is not back to the same levels seen before the financial crisis, there has been more positive news from recruitment companies of late. But the fallout from the financial crisis can still be seen, with corporates more price conscious, a factor which has contributed to the fall in rents.
However, it also points out that there has been a shift in the demographic of corporate tenants with an increase in the number of relocating executives from the oil and energy sectors during the final few months of 2013.
‘But the fallout from the financial crisis can still be seen, with corporates more price conscious, a factor which has contributed to the fall in rents. In addition, the strengthening sales market in the area, as price rises begin to ripple out from London, has put pressure on rents,’ the report says.
‘Indeed, agents have reported that some accidental landlords, who joined the lettings market in 2008 as their homes failed to sell, are returning to the sales market as prices start to rise.
Others, however, are taking a different route and are reinvesting in the Home Counties market to take advantage of the rising demand and higher yields that are available compared to central London,’ it adds.
There is also an active overseas tenant demand. Over the last 12 months, around 47% of tenants in this prime rental market came from overseas. In this time, Knight Frank has let properties to international tenants from America, South America, Canada, South Africa, France, Russia and Australia.
And overall corporate demand is up on last year. ‘To the end of December 2013, 36% of our deals in Ascot alone are a result of corporate activity, where as it was only 23% in the previous year. So a sign that the corporate market is certainly much stronger and continues to grow at pace,’ said Gordon Hood of Knight Frank Ascot lettings.
‘There are signs that the corporate summer market will be good again, with enquiries already coming through for summer moves, highlighting the increasingly positive economic outlook.
Additionally, 25% of our tenancies since April 2013, have been to people looking to buy in the longer term, mostly from London, to try the area before the purchase. Some will have sold in London whilst the market there has been stronger and will have to rent while they find their country home,’ he added.