London rents fall as family homes fail to sell

A HUGE glut of unsold London homes has sent rents tumbling by up to 20 per cent since the start of the summer.

Families that cannot sell their properties are instead becoming "amateur landlords" - but are finding that demand has dried up.

Rents are expected to fall further as the economic downturn deepens.

Surveyors expecting further falls in rents in London outnumber those expecting rises by three to one, according to research by the Royal Institution of Chartered Surveyors. This is a big turnaround since the summer when equal numbers predicted rises and falls.

The rental market has been hit by the wave of homes being put up for rent and a slump in demand from companies and banks relocating staff to London.

Lettings agents say it is the sharpest downturn since the aftermath of 9/11, but this slump is expected to last much longer. Emilie Dawes, lettings director at Marsh & Parsons, said: "The £1,000- to £2,000-a-week bracket - family homes typically occupied by bankers from Europe or America - has definitely been significantly affected. Also hit have been two-bedroom executive apartments, particularly along the Central line. Demand for these is down by 40 to 50 per cent."

She said rents in areas such as Kensington and Chelsea have fallen by as much as 20 per cent "and sometimes more".

Agents in other areas of central London favoured by wealthy financiers have also reported a huge fall in demand - to the point of none at all.

Christopher Ames of Best Gapp & Cassells in Belgravia said: "I would like to give you a figure but I haven't let anything. Asking prices have come down but there is no one looking."

Smaller flats are still being chased by first-time buyers who are holding off or cannot secure a mortgage.

Pimlico agent Edward Reeve said: "Rents for one- and two-bedroom flats in the £1,350 to £2,000 a month range have increased but it is apparent there is less demand for higher-priced flats. One recent letting at £2,900 per month was achieved after a two-month void. The previous letting was £3,445."

New landlords were advised to be sensible. Ian Potter, operations manager of the Association of Residential Lettings Agents, said: "Many landlords have entered the lettings market in the last year without perhaps planning to do so. I would urge these amateur landlords to exercise caution as it is a position of no little responsibility."