London’s Luxury Rental Market Is Benefiting From Flatlining Sales Prices

A lackluster luxury sales market helped to bolster London’s super-prime rental sector last year, according to a report Monday from Knight Frank. 

The city’s high-end sales market has been “reassuringly uneventful,” with average prices growing just 0.7% in the three years to December, according to the property firm, which noted that in the same timeframe, home prices nationwide jumped 12%. 

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But those relatively flat prices have led more homeowners to rent out their property rather than sell, and the jump in supply has been one of the “key drivers” of the market, said Tom Smith, head of super-prime lettings at Knight Frank. 

“Property owners at higher price points are more discretionary, and when they look around at what’s been happening in the sales market, many have gone down the rental route,” Smith said.  

Knight Frank defines a super-prime rental as one renting for “above £5,000 (US$6,343) per week in central and north London and more than £15,000 per month in southwest London.” 

The largest cohort (23%) of those renting trophy properties were domestic, but only just. Tenants from the U.S. trailed closely behind, accounting for 22% of deals. 

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“They often have a tech background and are moving to the U.K. with their families, attracted by the relatively weak pound and the fact politics in the U.S. has become more divisive in recent years,” Smith said. 

Regardless of where they hail from, the ultra-high-net-worth individuals who are signing these leases appreciate the non-permanence of renting, the report said. 

“If tenants need to subsequently relocate, they won’t be worried about how property prices have performed or the fact they have forked out 17% in stamp duty, which can be the equivalent of four or five years’ rent,” Smith said.