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The demand for super-prime lettings is skyrocketing, fueled by a surge of younger tenants, particularly tech professionals from the US, who are fiercely competing for the most coveted properties in London.
Last year, renters in London spent an astonishing £32 billion on rent, marking a significant £3.4 billion increase compared to 2022. This amount exceeds the total rental payments of tenants in the northern regions of England, the Midlands, Wales, and Scotland combined.
Millennials, constituting 43 per cent of London’s renters with an average age of 35, are noticeably shifting their preference towards central London areas, abandoning their previous tendency to cluster in more affordable outskirts. This migration trend, driven by the attainment of higher income peaks, is displacing Gen Xers.
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In upscale neighbourhoods like Mayfair, apartments are being leased to tenants from the U.S. and Western Europe, while houses in Mayfair and Chelsea attract interest from the Middle East and Asia.
Similarly, Marylebone has emerged as a sought-after luxury rental destination, securing tenants from the USA and China, while Hampstead appeals to families and students from China and Western Europe.
Despite the average monthly rent in London reaching £2,425, representing an almost 12% increase from the previous year, many millennials are facing significant challenges, with a considerable portion expected to continue renting into their retirement years.
However, high-earning millennials born in the late ’80s and early ’90s are increasingly entering the super-prime rental market, where properties begin at £5,000 per week, with prices often surpassing this threshold.
Intense competition among tenants is evident, with one flat in Marylebone originally priced at £7,000 a week eventually rented for £10,000 by a local estate agent.
This year, the upcoming general election is expected to bolster demand in the capital’s high-value rental market. The recent performance of the high-value London property market has been characterized as ‘reassuringly uneventful’, despite enduring global events such as the pandemic, a stamp duty holiday, and significant fluctuations in mortgage rates.
Over the past three years, average prices in prime central London (PCL) have grown by a modest 0.7%, reflecting the impact of successive lockdowns and travel restrictions, in contrast to the 12% increase observed in the Nationwide UK index over the same period.
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However, this relative stagnation in prices has prompted more property owners to opt for renting out their properties rather than selling, leading to a surge in super-prime tenancies, defined as rentals exceeding £5,000 per week in central and north London, and over £15,000 per month in southwest London.
On the political front, uncertainty surrounding the general election is expected to support demand this year. The Labour Party’s proposed overhaul of the non-dom tax regime and increased surcharge for overseas property buyers could pose risks for the prime central London sales market.
Forecasts predict a modest 1% growth in PCL prices this year due to political uncertainty, compared to a projected 3% increase across the UK. However, stronger growth is anticipated from 2025 onwards, with a total forecasted increase of 18.1% over the next five years.
Young professionals under 35, particularly those working in fintech, finance, and gaming industries, now represent half of Nest Seekers’ top-spending tenants. These individuals are reshaping the rental landscape in London, enjoying the amenities of central London living and driving demand for luxury properties.
Eric Corsaletti, Head of the Private Office at the global brokerage Nest Seekers International, emphasizes that access to top-notch restaurants and private member clubs is a priority for these tenants, highlighting the success of developments like Chelsea Barracks and predicting similar trends with upcoming projects.
Concierge services and turnkey rental properties are particularly appealing to transient residents, with luxury service apartments like Cheval Residences witnessing high demand. Additionally, there’s a growing trend among ultra-high-net-worth individuals to purchase “trophy homes” outside London while renting premium city pied-à-terre.
Despite facing competition from other global luxury markets, London’s prime housing market remains resilient, with strong demand and soaring rents in the super-prime segment, according to Eric Corsaletti.
Eric Corsaletti
