Hamptons International Reveals Rental Prices in London Fell at a Faster Rate than Property Values in the Last Quarter
14th January 2008 - Hamptons International, one of the UK’s premier international residential agencies and a subsidiary of Emaar Properties, has today released the latest figures from its Property Price Tracker, revealing that the final quarter of 2008 set a first for the year, with letting prices across many areas of London falling at a faster rate of decline than sales prices. Figures from Hamptons International reveal that rental prices experienced a fall of 9.8%, which outpaced the decline of sale prices (7.6%) in Q4 2008.
The London Market
The latest findings from Hamptons International are indicative of the recent turmoil within the financial markets, with the economic slowdown now affecting London rental prices. The report reveals:
- Supply of sales property coming onto the market is slowing rapidly with 42% fewer new instructions hitting the market in Dec-08 when compared against Dec-07
- Sale prices were down 7.6% in the final quarter of 2008 when compared with Q3 2008. The largest reductions at the top end of the market were in locations like Chelsea and Paddington where prices fell at close to twice the London average. The smallest reductions in capital values were found in Wimbledon and Pimlico, where values fell by less than 5% in the quarter
- Expected rental prices fell by an average 9.8% in the final quarter. Rental values held up well in Notting Hill and Tower Bridge, with falls of less than 4%. At the opposite end of the spectrum an increase in instructions and far fewer new applicants has significantly affected rental growth in Islington and Wimbledon with declines in excess of 12%
- Across London rental values dropped by an average of £145 per week during the last quarter. The cost of letting a semi-detached or detached property (of more than 2500 sq ft) became noticeably cheaper and available from £23 per sq ft per annum
- Investment returns were more or less static at an average 4.7%, down 11 basis points on Q3 2008. The strongest yields were found in Clapham, the City, and Chelsea. Smaller sized properties (sub 1500 sq ft) consistently offered higher investment returns with yields up around 6.7% achievable
Rob Bruce, research manager, notes, “In the London sales market we are still seeing the largest percentage declines hitting units at the bigger end of the market (3000 sq ft+) with an average decline of 11% in detached five-bed property in London during Q4 2008. Comparatively, an interesting trend is the way demand continues to focus on the two-bed corner of the market – attractive to investment buyers and first-time buyers alike – this is holding prices up more than the market average, down just 6.7% in Q4 2008."
The Country Market
Unlike London, the market across the rest of the country maintained the trajectory and dynamics of Q3 2008 with a shallower decline in rental prices, outpaced by the falls in average sale values.
- The supply of new sales property coming onto the market is 11% lower than the same time last year while in the lettings market new instructions are 72% higher having a sigificant impact on pricing
- Sale prices were down 5.9% in the last quarter, compared with a decline of 5.6% in Q3 2008. While letting prices were down 3.9% as opposed to 3.3% in Q3 2008
- Smaller properties offering one-bed or two-bed accommodation declined by an average 6%, while larger four-bed semi and five-bed detached properties declined by an average 5.3%. A significant number of locations witnessed smaller drops in value in the last quarter, as the market shows signs of stabilising. The average property in Bath lost just 1.4%, Gerrards Cross declined 2% and Great Missenden fell 2.9% in the last quarter
- The fall of 3.9% in the average weekly rental price represented a decline of around £21 per week. In most locations the declines continued to be most pronounced in the highend sector of the lettings market where corporate activity and cost cutting are biting hardest
- Initial investment yields improved fractionally in Q4 2008 and outperformed the London average, reaching 5%. The strongest yields were in the sub-1500 sq ft sector of the market where average yields of around 6% are achievable. The towns offering the strongest investment return are Godalming, Windsor, Guildford and Maidenhead
- In terms of locations offering more affordable space, many locations are now extremely tempting to the first time buyers locally, many of these locations around the south east offer excellent commutable links to London: Newbury (£175psf), Painswick (£184psf), Oxford (£196psf), or Fleet (£196psf)
Research manager, Rob Bruce added, “For tenants coming towards the end of rental agreements the picture is extremely positive. Competition among tenants has dropped from more than 5.4 tenants per new instruction in 2007 to a ratio of 4.7 tenants per property at the end of 2008. As a result their money will now stretch further and landlords have to be more accommodating to secure a good tenant."
Appendices
Figure 1 – Average Investment Yields across London
Figure 2 – Average Annual Rental across London
Figure 3 – Average Investment Yields across Southern England
Figure 4 – Affordable locations under £275 per square foot
For further information please contact:
Rob Bruce, Research Manager – Hamptons International
0207 589 9775, brucer@hamptons-int.com
Jane Jorgensen, Associate Director PR – Hamptons International
0207 589 9775, jorgensenj@hamptons-int.com
Lucy Gaynor, PR Manager – Hamptons International
0207 589 9775, gaynorl@hamptons-int.com