Foxtons says demand for rental properties in the London lettings market increased during the second quarter of the year, helping offset ongoing drops in rents.
The company says in its latest lettings report that this is evidence of “stabilisation” within the market, which has witnessed decreasing average rents for six months now.
“While this might not appear to be a significant increase, it comes against a backdrop of decline, suggesting that green shoots are starting to appear,” says Ed Phillips, Foxtons’ Managing Director of Lettings (pictured, below).
The number of renters looking for property who are registered for each rental property offered by Foxtons’ branches increased by 3.3% during the second quarter of the year.
But rents continue to decrease across many parts of the London lettings market, for several reasons.
This includes the glut of properties created by the rush to buy properties before the extra Stamp Duty was introduced in April last year.
Also, several large build-to-rent schemes have gone live in the capital this year, including the 1500-unit in the former Olympic Village.
Foxtons says the reason for this growth is an increase in demand for properties within London’s central Zone 1 and Zone 2 travel bands, lead by both domestic renters who make up 39% of tenants, and Asian and Middle Eastern ones, who increased to 13.1% of the rental market.
The most significant fall in rents in the second quarter were in Zones 3-6.
“We’ve spoken before about how the lettings market traditionally benefits from uncertainty in the sales market, as potential buyers turn to the flexibility offered by renting,” says Ed Phillips.
“With the sales market in the capital still a long way from returning to consistently strong growth, an increasing number of Londoners are indeed being drawn to the rental sector.”
In its gloomy half year report Foxtons’ lettings division was reported as its least-worst performing division.
Revenue from tenants reduced by only 2% compared to sales where revenues dropped by a third. The company blamed the slight dip in rental revenues on dropping rents, which it says dipped by 4% in June, although volumes increased by 1%.