Hamptons International has said its rental prices have fallen for the first time this year – down 5.5% from Q2 2008 in London, and 4.2% across the rest of the country.

London Findings:

  • Rental supply is outstripping rental demand. Both have risen when compared year on year: stock levels are up 131% and applicants up by 27%
  • Total offers made by applicants are up by 31% but actual offers agreed are lower
  • Rental drops averaged £74 per week during the last quarter
  • The top end of the market, with rental prices on a 4-bed semi detached property (of around 2500 sq ft) are down 7% and a 5-bed detached property (around 3000 sq ft) down 5.6%

Sales values in London have also fallen 6% during the last quarter.

But, with sales values falling at a faster rate than rentals, this has led to a rise in investment yields which improved by around 13 basis points in the last quarter to an average of 4.8%.

The City

The strongest investment yields can be found in the City – at 5.8% . These yields have grown 41 basis points in the last quarter as sale prices fell while rents remained virtually static.

Selling outside the city

The most expensive sector of the capital to buy property remains Knightsbridge (£1557 psf), with Kensington (£1500 psf) and St John’s Wood (£1163 psf) not far behind.

Hamptons found the most affordable areas of London are Dulwich (£315psf), Clapham (£431 psf) or Chiswick (£448 psf).

Renting outside the city

The annual cost of renting reflects a similar picture across the capital, with the most expensive areas Kensington: costing tenant £72 per square foot each year followed by Knightsbridge (£61), Paddington (£45) and Notting Hill (£43).

Home Counties Findings

  • Double the number of new instructions in September 08 compared to the same time a year earlier. Applicants in September also nearly double – up by a lesser 91% year on year
  • Weekly rental levels were 3.3% lower in the last quarter, declining by £27 per week
  • An imbalance between rental stock availability and tenant requirements is causing top-end properties to remain on the market longer (as fewer corporate tenants seek large properties to rent at top-end prices and a more local markets provide the bulk of the current tenants instead)
  • The average sale price of property is down 5.6% in Q3 2008, much in-line with the market in the capital
  • Across most of the country investment yields were in-line with London. Some of the areas with the strongest returns in the last quarter were: Windsor (6.1%), Maidenhead (5.9%) and Godalming (5.6%).
  • Capital decline in the country market is slowing, down 5.6% in the third quarter compared to a 6.4% decline in the second.