Chelsea loses glamour for wealthy tenants as Fitzrovia and Mayfair soar

Traditionally fashionable London borough proves less appealing to wealthy tenants than other top-end areas such as Mayfair.

A view across Fitzroy Square in London's prime residential borough of Fitzrovia, one of the central city areas where rents have surged. Loop Images / UIG via Getty Images
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There are winners and losers in London's prime central location (PCL) rental market, according to a new report today from LCP, a UK prime residential investment adviser, with once-uber trendy Chelsea losing its allure while ultra-high end Mayfair has soared.
But landlords may have to work harder to retain the top-end buck as supply grows and concerns grow over Britain's upcoming EU referendum.
On Friday, Britain's chancellor of the exchequer, or finance minister, said British house prices would fall 10 per cent to 18 per cent if the country voted for a Brexit.
"If we leave the European Union there will be an immediate economic shock that will hit financial markets," Mr Osborne said.
Naomi Heaton, the chief executive of LCP, said on Monday: "In light of the current market conditions, landlords may need to be more flexible to accommodate the higher negotiating power of applicants and to prevent void periods which may erode any increase in rent ultimately achieved.
"For as long as this cycle lasts, landlords also may need to be more open to remedial and upgrade works between tenancies."
By area, Marylebone, Fitzrovia and Mayfair have fared best, achieving an average increase in rent of 10.6 per cent for one bed flats and 12.8 per cent for 2 bed flats over the past six months.
In contrast, Chelsea and Earl's Court, traditionally the playgrounds of hip fashion divas and wealthy playboys, have fared the worst, with a 9.7 per cent drop in rents for one-bed flats and a 14.4 per cent drop for two-bed flats.
Positive rental increases for newly refurbished properties, "new-lets", have been seen each quarter since January 2015, averaging 5.5 per cent overall.
However, the market is beginning to subdue in the face of global economic uncertainty and Brexit. This quarter, new lets have achieved just a 0.3 per cent rental increase.
"Re-lets" [older properties being let to new tenants] have been hardest hit, reflecting a 1.2 per cent rental fall this quarter, LCP says.
This is a result of increasing stock on the lettings market, up 26.7 per cent over last quarter, according to Lonres, a high-end residential property researcher. Renewals for existing tenants, however, have reversed the trend with rental increases averaging 3.3 per cent over the preceding quarter.
"The overall suppression in rents reflects a market dynamic which was conspicuous during the credit crunch, as tenants capitalise on economic uncertainty to leverage up their bargaining power. This has been compounded by companies cutting their relocation budgets in the face of global instability and, in some cases, delaying relocations in the run up the EU referendum" said Ms Heaton.
"A slowdown in the re-let market has been compensated by continued positive renewal increases by tenants in situ.
"With landlords often able to achieve contractual rental increases, above that which can be achieved in the open market, average rental growth of 3.3 per cent in the last quarter has been seen in contrast to the softer market elsewhere."
Still, corporate belt-tightening means that small one and two-bedroom properties are reinforcing their position as the hardest working sector of the market. Appetite for these mainstream rental properties remains strong, with void periods down to just 23 days on average.
For tenants with the flexibility to move, now is the optimum time to secure the best deal, before rents, in all probability, harden post-referendum. Landlords may also seek to recoup the increased tax burden they will suffer due to increased entry costs with the Additional Rate Stamp Duty and the reduction in mortgage interest relief.
Landlords can, therefore, expect an improved picture next year as the market rallies and rents increase to counter the tax and Brexit headwinds" concludes Ms Heaton.
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