Due to the ‘reassuringly uneventful’ high-value London property market, more homeowners have chosen to rent out their property rather than sell — driving up the number of super-prime tenancies, reveals new data from Knight Frank.
Buyers and sellers in prime central London (PCL) have lived through a global pandemic, a stamp duty holiday and the fact five-year fixed-rate mortgages quadrupled in the two years to July 2023.
In the three years to December, average prices grew 0.7%, reflecting how successive lockdowns and international travel restrictions took their toll.
These factors have caused the increasing number of super-prime tenancies, classified as tenancies above £5,000 per week in central and north London and higher than £15,000 per month in south-west London.
The number of these tenancies rose 10% to 108 in 2023 from 98 in 2022.
The figure in 2021 was 81.
“One of the key drivers has been higher supply,” said Tom Smith, head of super-prime lettings at Knight Frank.
“Property owners at higher price points are more discretionary and when they look around at what’s been happening in the sales market, many have gone down the rental route,” he added.
Furthermore, number of new listings above £1,000 per week in London increased by 30% in 2023 compared to the previous year, Knight Frank data shows.
Below £1,000 per week, there was an equivalent rise of just 0.5%.
Prices in PCL are forecast to grow by 1% this year due to the climate of political uncertainty, which compares to a forecast of 3% across the UK.
Knight Frank expects stronger growth from 2025 in PCL, with a total increase of 18.1% forecast over the next five years.
“Global ultra-high-net-worth individuals like the non-permanence of renting and super-prime lettings properties are often in direct competition with London’s luxury hotels for that reason,” said Tom.
“If tenants need to subsequently relocate, they won’t be worried about how property prices have performed or the fact they have forked out 17% in stamp duty, which can be the equivalent of four- or five-years’ rent.
“These tax changes have pushed up demand in recent years, which means landlords need to specify their property to the same high standard as they would if it was being sold,” he added.
Landlords that follow this advice can expect to achieve higher investment yields, given the rarity factor at the very top of the market, advised Tom.
He commented: “Yields of 4.5% or more can be achieved in the best luxury developments that have similar amenities to five-star hotels.
“That compares to less than 3.5% across the wider market in Knightsbridge or Mayfair.”
