LONDON SUPER-PRIME LETTINGS INSIGHT SPRING 2019

While activity in the super-prime lettings market is not accelerating at the same pace as previous years, long-term tenant demand will remain strong, as Tom Smith tells Tom Bill

There were a total of 131 super-prime (£5,000- after the re-pricing that has taken place. Some plus per week) tenancies agreed in London in recent high-profile sales have helped boost 2018, which was marginally lower than a figure sentiment in this regard.” of 136 recorded during 2017. Despite this shift, the changeable and 46 Avenue Road, guide price £17,000 per week Despite this relatively flat performance, the increasingly stringent global tax environment number of deals last year was more than a means demand for super-prime lettings fifth higher than 2016 or 2015. It suggests that properties will remain strong, said Tom. super-prime lettings activity has stabilised after two years of strong growth, as figure 1 shows. “Tax and regulatory changes around the world mean some have reacted by becoming more Demand has risen in recent years in response footloose and would rather rent rather than to the more adverse tax landscape in the sales buy,” he said. market and, more recently, political uncertainty While such tenants typically look for apartments related to Brexit. Higher transaction costs 8 Wilton Crescent, guide price £25,000 per week and the associated price declines in the sales or penthouses that are serviced by five-star market meant that more would-be buyers hotels, there is a lack of supply for this type became tenants. of property in the highest price brackets. Please get in touch Apartments represented 40% of super-prime If you’re thinking of letting your property, However, a growing belief among some that lettings listings in 2018, down from 47% in renting in London or would just like some pricing in the super-prime sales market may be 2016, LonRes data shows. property advice, please do get in touch, near the bottom means activity could be flatter we’d love to help in the lettings market, says Tom Smith, head of This tightnening supply means landlords super-prime lettings at Knight Frank. can charge a premium for the highest-value Tom Smith apartments, said Tom. “Super-prime lettings activity experienced a Head of Super-Prime gear-shift in recent years and now I sense the “A best-in-class house will rent for Lettings market may be reaching a plateau,” said Tom. approximately £130 per square foot per year. [email protected] “We have a number of prospective tenants who However, the figure is closer to £230 for the +44 20 7881 7730 are looking at the sales market more closely best apartments.”

FIGURE 1 FIGURE 2 The super-prime lettings market plateaus London super-prime lettings volumes and achieved rental values £5,000-plus per week tenancies agreed, annualised Total Transactions Average weekly rental value Maximum weekly rental value % change £12.5k £20k £23k £13k £17k £15k £19k £45k £30k £35k £45k £14k £20k £29k £25k £30k £19k £30k £25k £27k

30% 50 £10,000 40 20%

30 10% 20 £8,000 Total lets Total 0% 10 Average rental value rental Average -10% 0 £6,000 Jul-17 Jul-18 Jan-17 Jan-18 Jan-19 Mar-17 Mar-18 1-2014 2-2014 3-2014 4-2014 1-2015 2-2015 3-2015 4-2015 1-2016 2-2016 3-2016 4-2016 1-2017 2-2017 3-2017 4-2017 1-2018 2-2018 3-2018 4-2018 Sep-17 Sep-18 Nov-17 Nov-18 May-17 May-18

Source: Knight Frank Research / LonRes Source: Knight Frank Research / LonRes RESIDENTIAL RESEARCH

LONDON SUPER-PRIME LETTINGS INSIGHT AUTUMN 2018

FIGURE 3 FIGURE 4 Where do super-prime lettings deals take place? Super-prime lettings market share Highest achieved weekly rental value, 12 months to January 2019 Percentage of super-prime lettings deals agreed by neighbourhood

N/A / Sub-£1,000 £1,000 to £2,500 £2,500 to £5,000 £5,000 to £10,000 £10,000-plus Kensington Hampstead Heath Notting Hill Hampstead St Johns Wood Chelsea Hampstead South Kensington Belsie Park ictoria Richmond Riverside Wandsworth Year to January 2019 Battersea Year to January 2018 Regent's Fulham Park Wapping St John's Wood Hyde Park Estate 0% 5% 10% 15% 20% 25%

Source: Knight Frank Research / LonRes

Marylebone FIGURE 5 Super-prime supply New £5,000-plus per week listings by postcode Notting Hill Mayfair Hyde Park Postcodes W WC SW E SE NW Holland N TW Belgravia Park 100 Knightsbridge

80

South Kensington 60 Chelsea Battersea Park 40 Number of listings Fulham

20

0 1 16 2 16 3 16 4 16 1 17 2 17 3 17 4 17 1 18 2 18 3 18 4 18

Source: Knight Frank Research / LonRes Source: Knight Frank Research / LonRes

RESIDENTIAL RESEARCH

If you would like further insight into London Important Notice residential markets please © Knight Frank LLP 2019 - This report is published for general information only and not to be relied upon in any way. Although high standards have been used in feel free to get in touch Tom Bill the preparation of the information, analysis, views and projections presented in this Head of London report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the Residential Research contents of this document. As a general report, this material does not necessarily +44 20 7861 1492 represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written [email protected] approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.