House rents soaring in London

LONDON'S home-lettings market is staging a dramatic recovery, with rents rising at the fastest pace for more than three years.

In a new report which will ease fears the capital's housing market is heading for a crash, estate agent Knight Frank says rents in London's most sought-after areas were 4.7% higher in September than they were a year ago - the fastest rate of increase since August 2001.

That was in marked contrast to the 6.2% annual decline seen in September 2003.

Knight Frank attributes some of the rising demand for rental property to an increase in the number of 'in-betweeners' - would-be housebuyers who are reluctant to commit themselves at a time of uncertainty.

It also points out there has been an increase in the number of corporate lettings as a result of company relocations, particularly by European firms.

Tim Hyatt, head of residential lettings at Knight Frank, said: 'The mood in the prime London lettings market is moving from one of cautious optimism to being genuinely upbeat.

'This change in sentiment could trigger renewed interest in the buy-to-let market as investors begin to see tenant demand improving and yields trending upwards.'

The rental pick-up goes some way towards undermining arguments that a sudden sell-off by landlords scrambling to offload properties at what they believe to be the top of the market would be the harbinger of a sharp correction.

Recent house-price surveys have suggested the market has come decisively off the the boil.

Doom-mongers at City investment bank Durlacher have predicted a collapse in house prices of between 30% and 45% as Britain's army of buy-to-let landlords all try to sell.

Today's report suggests, however, that this major threat to a property market 'soft landing' will fail to materialise.

Increased demand for rented property has been accompanied by an acute supply shortage, especially in Docklands, Wapping, Notting Hill and Chelsea.

Liam Bailey, head of residential research at Knight Frank, said: 'We expect to see even further strengthening over the coming quarter, which will hopefully encourage more landlords to bring properties to the market to alleviate the current stock shortages.'

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