London Central Portfolio (LCP) annual lettings audit has shown the ever-growing importance of the international student sector in Prime Central London (PCL).
Finance professionals, traditionally the main inhabitants of rental apartments in the exclusive neighbourhoods of PCL, are no longer renting as much in these areas as a direct result of the financial crisis, when employment in the finance sector went down by about one third.
Prosperous foreign students have taken on the mantle, with their share of the market doubling from 12% to 29% between 2006 and 2012. Such momentum has been consolidated, with students accounting for a huge 41% of new tenancy starts in the last year. By contrast, new tenancy starts from finance professionals has drastically fallen to 21%, the lowest LCP has ever seen.
The rental sector in PCL has witnessed a 6.2% increase in rents for brand news flats in the last six months, according to LCP’s tenancy records. As far as re-lets are concerned, there has also been an increase in rents, in line with inflation, for the first time in five quarters. Once more, students have had a big part to play in this recovery – they have not only increased competition in the market through sheer numbers, they also have deeper pockets. They are currently outbidding the corporate sector for properties, willing to pay £600 a week for a flat, 7% above the average market rent of £562.
“The increase in student renters in PCL should be no surprise. Westminster houses three of the best universities in the world; Imperial College, University College London and LSE, and sees 100,000 students visiting a year,” says Naomi Heaton, CEO of London Central Portfolio. “London has become a magnet to these privately wealthy young adults who are looking for top quality accommodation to go with their top drawer education. With 82% of affluent Chinese families currently planning to send their children to study overseas, this importance of this sectors looks to be going from strength to strength.”
She adds: “Even as financial markets recover, landlords are increasingly buying into the concept of international student tenants. Many have experienced a sophisticated lifestyle: they treat properties with the same care as corporate tenants but the wealth underpinning them is stronger. This means they can often outbid professional tenants, offering higher rents, often a year upfront, as parents are keen to install their children in the best, most secure homes.”
There is, however, an increased seasonality in the market. Some students will only rent for the academic year, contributing to the higher level of tenancy start-ups by the student population. Conversely, those from the financial sector may extend their tenancies and stay on a more long-term basis, which makes them a still attractive proposition for landlords.
LCP’s audit also shows an unexpected return of British tenants to PCL, taking up 13% of properties in the last 12 months, the most of any nationality. These British tenants range from the corporate sector to entrepreneurs, retired couples looking to live the London life, and pensioners who are studying for their PHDs.
Lastly, data by LCP also indicates that the market is gradually shifting to smaller one bedroomed units, with most tenants single or duos. This can be explained by the fact that Central London is a popular, ’go-to’ destination for the young (40% of residents are between 20 and 39 years old) and corporate high achievers tend to come over as singles or couples. Furthermore, it reflects the growing standing of the international student community who generally come to live alone and don’t share unless they arrive with siblings.
“The dynamics of the private rented sector have clearly shifted in Central London,” Heaton concludes. “To optimise their returns, it is important for landlords to recognise and adapt to the changing landscape.”
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