Update on lettings in London

Weekly rents, particularly for small flats – which make up 80pc of all stock – have started climbing again. However, the flats that let best are changing and landlords must adapt to stay ahead.

The key dynamic is location over size. The squeeze on rents during the credit crunch as corporates underwent stringent belt tightening has not completely relaxed. This means that for tenants who are attracted to the bright lights of central London, smaller, more affordable properties are increasingly sought after.

A huge influx of international students, often living on their own, has also increased demand for smaller units. Students, only 12pc of LCP’s rentals pre-recession, now make up 34pc of new tenancies. This has created further opportunities for higher returns if landlords can be flexible with marketing times.

Student tenants can often outbid professional tenants, offering higher rents and often paying a year upfront as they have no recorded credit history in the UK. The average rent paid in the last year by a student tenant was £2,405 a month.

One- bedroom properties should be the top pick for those looking to attract either student or blue-chip corporate tenants in central London according to LCP’s audit. They remain the most popular, with an average turnaround time between tenancies of only just 19 days.

The company’s latest fund, London Central Apartments III, which focuses on the private rented sector, has taken full advantage of this, acquiring 50pc more one-bedroom than two-bedroom units, which which see higher average voids (25 days).

For investor’s weighing up where to buy to generate the highest returns, the most internationally favoured areas have come out on top again. Landlords in South Kensington, a favourite of French tenants, have the most reason to celebrate. Now receiving more than over £100 a day in rent for the smallest of flats, the area is clocking up an average of £747 a week, more than the average UK salary.

However, given tenants’ budget constraints, the most renowned areas have less head room for growth so rents are likely to fall back in line with the rest of the central London market. Mayfair, for example, saw the largest fall in rents this year (14.8pc to £678 a week).

The smart buy-to-let investor is looking away from PCL’s traditional locations to areas where there is still room for both prices and rents to go up. A prime example is Pimlico, whose rents have lagged behind price rises in recent years, but are now up nearly 9pc to £560 a week.

But location is not everything as tenant priorities shift. To maximise rents, landlords must recognise the importance of quality.While size may not matter any more, immaculate presentation is now paramount.

While rent increases at tenancy renewals are running at an encouraging 3pc, newly renovated properties brought to market, have seen an average uplift in rent of 10.9pc in the past three months. This compares with older stock, which has seen little to no increase at just 0.3pc.

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