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London rental market likely to see little inflation in 2015

Rental prices in London are set to stabilise through 2015, with a nominal 1-2% rise, according to agents Douglas & Gordon.

The company’s London Barometer predicts little real wage growth will mean consumer resistance to further increases in rents. However, looking back, their figures for 2014 show steady modest growth of London rents, showing strongest demand for smaller flats and larger houses.

One bed flats, for example, were costing an average £384 a week in the first quarter of last year, a rent that had risen to £403 by the year end. Two bed units had risen from £525 to £538. Three bed homes saw rents barely move, from £835 to £840 over the year – though they peaked in the third quarter at £858. Four bed homes also saw a an autumn peak, ending the year at £1,433 a week against a rent of £1,409 early in the year.

“Nearly double the number of new applicants were registered in December compared to twelve months ago, showing the rental market is very healthy,” said Virginia Skilbeck, lettings director. “As we go into an election year, generally people are inclined to put off major decisions until after the election so renting rather than buying for the time being is probably on the agenda for a large majority.”

“The number of properties we were instructed to re-let was twice as many compared to the same month last year, this is largely due to the fact that this time last year significant numbers of landlords were opting to sell up and cash in at a time many considered to be the “peak” of the market, whereas landlords are now electing to hold onto their investment properties.”

“We have had six months of consecutive growth in the size of our currently let property portfolio, which demonstrates that the lettings market grew consistently during the second half of last year, counterbalancing what was happening in sales.“

“Against this backdrop of a fairly volatile sales market, we believe that the rental market next year will be stable but with concerns over real wage growth our forecast is that rents in D&G Land as a whole will increase by a nominal 1% or 2%.”

In the sales market, worries over stamp duty costs are already having an impact, with the market for homes above £950,000 stalling. The agent says 2014 was characterised by vendors giving in to offers, with the result that more sales were concluded.