Brexit Uncertainty Still Injuring London Luxury Home Sales, Yet Aiding Prime Rentals

According to international property consultant Knight Frank, demand for the acquisition of prime London property continues to be negatively influenced by political events in 2019.

While the uncertainty surrounding Brexit and the stability of the government has led to hesitation in some sales markets, it has caused demand for super-prime (£5,000+ per week) lettings property to strengthen.

There were a total of 40 transactions agreed in this price bracket during the second quarter of the year, which was the highest figure for the period in more than seven years. Furthermore, there were 153 super-prime tenancies agreed in the year to June, the highest annual total over the same period.

"People are watching and waiting for the political situation to play out and some have decided to rent," said Tom Smith, head of super-prime lettings at Knight Frank. "People tell me they want to remain flexible, not just because of Brexit but because of their concerns around global trade tensions and the state of the world economy."

Demand has increased in areas like Notting Hill and St John's Wood, says Tom. "Demand in both areas is driven by the quality of the schools and they have been particularly popular among US tenants. The weakening pound means overseas tenants have been able to increase their budgets."

A tenant denominated in US dollars with a budget of £5,000 per week has seen this grow to the equivalent of more than £6,000 since the EU referendum.

The emergence of high-quality super-prime developments has also helped drive tenants into areas like Mayfair, says Tom.

However, the supply of super-prime new-build properties is tightening. The number of new super-prime lettings listings declined to 209 in the second quarter of this year compared to 284 a year ago.

"The shortage of supply, particularly for the most in-demand new-build developments, means there can be a premium for the rental values paid," says Tom. "There are several examples where this has pushed the rental yield to in excess of 4% in the best schemes, which is high by the standards of prime central London."

Key London market highlights include:

* Strengthening demand for super-prime lets in London

• While uncertainty surrounding Brexit and the stability of the government has led to hesitation in some sales markets, it has caused demand for super-prime (£5000+ per week) lettings to strengthen

• During the second quarter of this year 40 transactions were agreed above £5,000 per week - the highest figure for the period in more than seven years

• There were 153 super-prime tenancies agreed in the year to June - the highest annual total over the same period

* Rising spending power of US tenants

• A tenant denominated in US dollars with a budget of £5,000 per week has seen this grow to the equivalent of more than £6,000 since the EU referendum

• Demand has increased in areas like Notting Hill and St John's Wood, driven by the quality of schools. Both locations have been particularly popular among US tenants who have been able to increase their budgets due to the weakening pound

* New-build developments driving demand but supply is tightening

• The emergence of high-quality super-prime developments has also helped drive tenants into areas like Mayfair.

• However supply is tightening, the number of new super-prime lettings listings declined to 209 in the second quarter of 2019, compared to 284 a year ago