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3 July 2007

Rents in central London continue to rise

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by Gill Montia

Rents in central London continue to rise

In Central London, rents have risen by 12% in the year to June and soared by 4% in the second quarter of 2007 – this is the highest quarterly growth rate since 1995.

In some boroughs of London, the growth has been even more remarkable. Canary Wharf and Wapping hit yearly levels of above 14%.

Rents in Kensington and Notting Hill have increased by an average of 6% in the second quarter of 2007.

While rents are rising, however, so are property prices and this means that yields have taken a beating – these are now at an all-time low. Strong rental growth recently has been attributed to the shortage of houses in the marketplace. Some landlords are selling properties to benefit from high capital price growth and to cut their exposure to rising interest rates.

1 and 2 bedroom flats are in strong demand as recruitment and performance remains strong in London. Yields in central London have declined to a record low.

Gross yields are slightly above 4% after outstanding growth in
property prices this quarter. Despite rents rising since the start of 2007, capital value growth has outshone the performance of the rental market.

It is expected that rental growth will catch up with capital value growth over the coming months.

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