London's Prime Market Rents Decline in May Due to Continued Economic, Job Uncertainty

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According to London-based real estate consulting firm Knight Frank, despite a promising upturn last month, prime central London rents fell by 0.3% in May on the back of deflated demand and growing supply.

Liam Bailey, Head of Residential Research at Knight Frank tells World Property Channel, "Rents in prime Central London fell in May, dropping by 0.3% and reversing April's small but promising 0.1% rise. Rents have fallen modestly for seven of the past eight months, and are now only 0.2% higher than in May last year.

"While supply is rising as keen landlords bring more properties to the market, the appetite for them is failing to keep pace - a reflection of continued uncertainty in the city employment market."

This is most evident in the mid-market - notably properties with two or three bedrooms in the £1,000 to £2,000 per week bracket - due to the fact that it is the mid-level city jobs that have been most affected by cutbacks. With the on-going troubles in the Eurozone and associated uncertainty in the finance sector, there is little sign of this reversing in the coming months.

The higher and lower rental brackets remain active however, with seasonal demand for family houses, with four or five bedrooms and priced above £2,000 per week, holding out as families look to settle over the summer before the academic year starts in September.

Bailey continues, "Reports that rental accommodation in prime London could be in short supply due to this summer's Olympic Games have clearly not yet been borne out. While this could be because the high demand for short lets simply wasn't there, it could be argued that the demand was in effect removed by LOCOG, the London Organizing Committee releasing a further 600,000 hotel room nights which were previously set aside for officials and the media but are no longer required.

"Demand could pick up over the summer as more families search for their new home in time for their children to start school in September, and also as London's foreign students, estimated to total around 102,000, prepare to arrive in August to secure accommodation for the new term."