Across the UK as a whole we are expecting the shift towards renting among those unable to raise a deposit stock to drive rental growth in line with earnings over the next five years
While we expect this to support rental demand amongst young professionals, and therefore underpin rental growth in the one and two bedroom prime flat market, we do not expect it to have the same impact in the prime markets. Prime central London rents are more obviously driven by City sentiment and corporate demand, with a historic correlation with the FTSE. As a consequence they are more volatile than the mainstream rental market. We are forecasting rental growth of 3.0% in 2013 and 24.0% by the end of 2017 in prime central London, though we acknowledge the potential for further city job cuts presents the biggest risk to these forecasts.
Nonetheless, landlords in the prime central London market are forecast to benefit from strong capital value growth over the forecast period, something which underpins the investment attributes of this sector. (Savills report January 10th 2013)