London's high-end rental market shows signs of life

London's high-end rental market has just wrapped up a highly buoyant third quarter, according to a report from London Central Portfolio.

The third quarter results may have been lively, but they won't have reflected the chaotic economic conditions that have just struck in the country.

During the three month period from July to September a shortage of rental stock and high demand dramatically cut the time when prime rental homes sat vacant. In happy news for landlords, the report said that properties spent just 9.7 days on the market before finding a tenant in the third quarter, compared to a longtime average of 31.8 days.

A combination of high demand and low stock, as well as a surge in demand as overseas tenants return to London, pushed up prices during the third quarter, leading to bidding wars.

This is a strong quarter for rental activity in prime central London. The number of tenants returning to London and opting to carry on renting has increased as the economic outlook looks uncertain, according to Andrew Weir, CEO of London Central Portfolio.

Despite the number of external factors that affect the sales market, the rental market is proving to be more buoyant. In the third quarter, both renewals and re-lets reached nearly 5% and 18% in increases, he added.

Market conditions may be different from what the sector has just seen in the fourth quarter.

The pound hit an all time low in just a few weeks, living costs went up, the country s longest reigning monarch died, and the newly appointed government announced a move to cut taxes for the highest earners in the wake of global markets crashed.

One expected ramification is a jump in demand from international investors who will be lured into London by its weak currency, though it will be a while before any impact is recorded in the housing market.

A weak pound means that many foreign buyers are benefitting from a dramatic boost to purchasing power, according to Marc von Grundherr, director of Benham and Reeves, in a separate report Tuesday. Prime London sales start to climb over the coming months, and this is bad news for the wider economy.