2019 has seen a strong start for London lettings, with high levels of demand, rising yields and stabilising returns revealed in our London Lettings Report Q1 2019. We summarise the key findings and what they mean for property investors in the capital.
Demand and supply
With 9.2 tenants registering for every listed property, Q1 2019 saw an increase in demand when compared with this quarter in the previous four years. Foxtons also registered 6% more tenants than during the same period in 2018, with the most notable increases outside of central London.
The number of available properties has not kept pace with the increases in tenant registrations during Q1 2019. Zone 2 saw a decrease of 20% in available rental properties when compared with Q1 2018, while London as a whole saw a 14.4% decrease. The increased demand, combined with reduced supply, is subsequently supporting rises in rental values.
Rental properties in Zone 2 enjoyed the highest rental value growth during Q1, while the London average remained stable at 1.3% growth compared with Q1 2018. Larger properties enjoyed the biggest growth, with rental values increasing by an average of 6.4% for homes with three or more bedrooms.
One interesting feature of rental prices is the premium commanded by lower ground floor apartments – 8.7% above average prices in Q1. Raised ground floor flats attracted a 6.7% premium, while properties on the first floor or higher achieved 3.4% higher rental prices than average.
Thanks to growth in rental values, gross yields for London apartments rose slightly during Q1 2019 to 5.1% – their highest level in more than three years. Cooling in capital growth rates kept total returns stable, however, remaining at the same level as Q4 2018.
Looking at longer-term investment performance, properties in Zones 3-6 have seen the strongest capital growth over the past 5 years. However, Zone 1 properties performed best over the last 10 years, achieving over 90% capital growth since 2008-2009.
Click to view our full London Lettings Report Q1 2019.
Landlords can find a full range of help and advice on our Landlord Help page, including yield calculator, compliance and regulations, information on buy-to-let mortgages and much more.