13th March 2006

ARLA Members Survey Report First Quarter 2006 109k

Probably for the first time since the Dot Com bubble burst and the shock effects of 9/11, the rental market in prime central London is starting to motor. This has been welcomed as an expression of confidence in London's financial sector and for the positive ripple-effect it will have on the rental markets outside London.

According to the latest quarterly survey of its members published today, London's most expensive areas have seen a tenfold increase in the balance of demand.

From a low point in 2002, when only 5% of ARLA agents believed there were more tenants than properties, an astonishing 48% report more tenants than properties during the first quarter of 2006.

In the last six months, achievable rent levels have also risen significantly. Up to 55% of all ARLA member letting agents report rent levels are on the increase across all types of property. Flats have shown the biggest rise.

Average weekly rents in prime central London are £602 (£2,610 per month) for a house and £405 a week for a flat (£1,754 for a flat). This is a third higher than the rest of London and more than double the rest of the South East.

It falls to the South West to have the most expensive rentals outside Greater London, with average weekly rents for a house reported at £261 (£1,132 per month) and for flat at £172 per week (£743 a month). The lowest rentals are to be found in Scotland, Wales and Northern Ireland, where rent for a house averages £152 per week (£657 per month) and £127 (£552) for flats.

Welcoming the prime central London turnaround, ARLA Chief Executive Adrian Turner, said, "Much of this London market is driven by the financial sector, so not only is this a sign of confidence in London but the ripple effect should have a major impact on rental markets away from London."

Reflecting the rental turnaround, in prime central London the average capital asset values for rental properties have fallen by 4.8%, although flats have risen in value by 1.7%. However, values for both are higher than they were in the spring of last year.

The average value of rental houses in prime central London is nearly two-thirds of a million, £652,400. It is less than half that at £283,100 in the rest of the South East and just £226,400 in the rest of the UK. Flats range from £412,600 in London to an average of £152,100 away from London and the South East.

Rental returns during the first quarter of the year are reported at 4.8% for houses in prime central London and 5.1% for flats. In the South East returns are 5% and 5.4% for houses and flats respectively and a 5% return is the average for both types of property throughout the rest of the UK.

It is notable that, in London and the South East, flats appear to earn a higher gross return than houses.

Said Adrian Turner, "The differences in achievable rents and asset values reported this quarter rental demonstrate precisely the balance between the two that is at the heart of an investment in residential property. This is important as, on average, more than half of the property portfolios managed by ARLA members are investment properties."

This latest survey reveals that the ARLA total of 1,700 member offices probably accounts for two thirds of all lettings through agents. Extrapolated figures show these offices currently arrange 628,700 tenancies.

The quarterly survey of ARLA member letting agents is the largest of its kind in the private rented sector with over 400 respondents. It can be viewed in full on www.arla.co.uk

ARLA Members Survey Report First Quarter 2006  109k

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