A gap between London and the regions is also evident in the prime rental markets. Prime London rental values have risen by 9.7% in the year to the end of June, putting them 3.9% above their 2007 peak.

By contrast in the prime rental markets of south east England rents remain below their peak and annual rental growth stands at 2.1%.

Strong growth is evident in Islington, Hampstead, Canary Wharf and the Docklands. In these cases, double-digit growth has been recorded over the past 12 months, fuelling an increase in investor demand within the London sales market.

This ironically has the effect of pulling further stock back out of the rental markets – at least temporarily. (Rental stock had risen with the advent of the accidental landlord in the poor sales market of 2008.)

Rental stock in the prime rental markets of the South East is not as constrained as in London, and the recent weakness in the sales market has seen the return of the occasional accidental landlord.

Taken from:
Residential Property Focus, Q3 2011