With rents in London hitting new highs and displaying annual growth of 5.8 per cent, according to the most recent Buy to Let index from LSL Property Services, investors may be wondering what exactly is pushing the market ever higher. Senior partner and head of lettings at WA Ellis Lucy Morton explained that one of the main factors affecting the capital's rental sector is the lack of new homes available to let. "The supply of good rental property has stayed tight and demand from prospective tenants has continued, with premium rents being paid for the very best properties," she stated.
Ms Morton added that, in central London in particular, "competition from tenants has helped push [rents] to record levels". She noted that the average monthly cost of renting a dwelling in the city now stands at GBP 2,075 - considerably higher than the UK average of GBP 718. However, demand from tenants and a scarce supply of suitable properties are not the only reasons why London rents have continued to climb.
A survey released at the start of November by the Association of Investment Companies suggested some further factors that are helping to boost the market. Richard Kirkby, manager of the F&C Commercial Property Trust, told the organisation that London's robust performance has been aided by "a stronger local economy [and] a more affluent population", in addition to its reputation as both a global and national centre. He added that the impressive rental and capital value growth in London has attracted international investors due to its maturity, transparency and liquidity.
It appears that supply issues in the London residential real estate sector are not likely to end any time soon either, with the most recent housing supply report by Communities and Local Government revealing that stock levels in the capital have fallen dramatically. According to the figures published on November 2nd, London saw the number of additional homes on the market drop by 27 per cent between the 2009-10 and 2010-11 research.