Despite a slowdown in the growth of housing prices, luxury properties in upmarket suburbs of London are being rented out at record prices, according to a February property market report in The Guardian.
Large properties in areas such as Notting Hill and Primrose Hill ranked among the list of homes in the capital rented for more than £5,000 per week. Foreign renters accounted for the majority of tenants in this higher-end segment of the market.
According to real estate agency Knight Frank, an increasing number of customers are choosing to rent “super-prime” properties in London. The total number of lettings in this category is up 34 per cent from last year, with a total of 137 contracts in 2017 compared to just 102 in 2016.
British tenants made up just a fifth of renters in this category, as did Americans. Common luxury renter nationalities included Chinese, Russians and French, with non-local tenants accounting for the majority of business.
While the “super-prime” category includes properties with a rental price of more than £5,000 per week, many of the properties included in this letting category, including apartments in London, fetch considerably higher prices on the letting market.
Data from Knight Frank indicates that the total number of homes being rented for a weekly rate of £15,000 or more has almost doubled since 2016.
One, a six-bedroom home in Holland Park valued at approximately £27 to £28 million, was put on the rental market at a rate of £18,000 per week. The property, like many others in its class, includes features such as a wine cellar, multiple reception rooms and in-house gym.
Several economic trends could justify the increase in high-end lettings. One is a mild decline in London residential real estate prices that occurred during 2017 — the first reduction in average home pricing since 2009.
In response to falling prices, particularly in certain areas of the capital, analysts believe that the potential customers for luxury properties are instead opting to rent to avoid a potential ongoing decline in home value after purchasing real estate.
Another potential cause for the increase in high-end lettings is the tax implication of buying in London. Higher stamp duty rates have made purchasing luxury real estate a more expensive process, even for the country’s wealthiest homebuyers.
London’s significance as an international business city has also led to robust demand for rental houses for wealthy individuals that may not necessarily want to purchase property in a city that isn’t their primary place of residence.
Finally, the increase in high-end rentals could also be due to difficulties in selling newer luxury homes in the capital. Many owners of luxury homes are reportedly offering them for rent rather than putting them on the market, knowing that super-rich overseas buyers are less interested.
Despite the increase in high-end renting in London, rental growth on average is fairly slow. UK rents fell for the first time in five years last November, with a particularly large 0.83% decline in London rental prices balancing out growth in rents throughout the rest of the UK.