The amount of super prime tenancies has increased by 10% in 2023, signalling a return of the prestigious end of the UK rental market, Knight Frank research has revealed.
Super prime tenancies are classified as those above £5,000 per week in central and north London and higher than £15,000 per month in south-west London.
The number carried out by Knight Frank rose 10% to 108 in 2023 from 98 in 2022. The figure in 2021 was 81.
Relatively flat house prices mean more owners have chosen to rent out their prime properties rather than sell them.
Tom Smith, head of super-prime lettings at Knight Frank, said: “One of the key drivers has been higher supply.
“Property owners at higher price points are more discretionary and when they look around at what’s been happening in the sales market, many have gone down the rental route.”
The number of new listings above £1,000 per week in London increased by 30% in 2023 compared to the previous year, Knight Frank data shows. Below £1,000 per week, there was an equivalent rise of just 0.5%.
Uncertainty surrounding the general election is expected to drive demand this year.
Should the Labour Party win power, they have pledged to overhaul the non-dom tax regime as well increase the surcharge for overseas buyers of residential property. Both represent risks for the prime central London sales market.
Smith added: “Global ultra-high net worth individuals like the non-permanence of renting and super-prime lettings properties are often in direct competition with London’s luxury hotels for that reason,” said Tom.
“If they need to subsequently relocate, they won’t be worried about how property prices have performed or the fact they have forked out 17% in stamp duty, which can be the equivalent of four or five years’ rent.
“These tax changes have pushed up demand in recent years, which means landlords need to specify their property to the same high standard as they would if it was being sold.”
He said: “Yields of 4.5% or more can be achieved in the best luxury developments that have similar amenities to five-star hotels. That compares to less than 3.5% across the wider market in Knightsbridge or Mayfair.”
Most prime tenants are from the UK (23%) and US (22%), while they commonly come from a tech background.