We’re at the beginning of a brand new year, and January is expected to be an excellent month for rental growth in London’s prime sector, according to a recent report from estate agents Marsh & Parsons. The period is typically the strongest for growth outside of the summer months. In each of the last three years December to January has seen an average 34% increase in rental exchanges. It is expected that 2016 will follow this trend as people look to make changes to their domestic situation at the very start of the New Year.

The prospect of new growth is exciting for investors, because 2015 saw rental rates slow in London. In fact, over the next 12 months rents are expected to rise by 5%, putting them significantly ahead of last year. This could provide great rewards for investors who have had to deal with a challenging period over the last few months.

Another piece of good news for investors is that the average length of tenancies in London is increasing. In the third quarter of 2014, the average tenancy lasted for 19 months. By the same point in 2015, it had extended to 23 months. Longer tenancies are beneficial for landlords because it means they can enjoy a more stable income. It will also help them to save on costs.

Two year tenancies are expected to remain popular in London in 2016 because they provide stability for tenants. Demand for properties is expected to remain high so tenants are more likely to want longer contracts to avoid having to re-enter the market every twelve months. Landlords can take advantage of this by offering longer contracts and including rental rate increases in them.

One of the biggest growth areas in 2016 could be for two bedroom properties. Demand is the highest in London for single bedroom homes in prime areas, but the supply of these is still lagging behind the demand. This could have a knock-on effect on the demand for two bedroom properties as a compromise.

The coming year could prove to be a very interesting one for the property market in London in 2016 and could offer some great rewards for owners of investment properties in Tower Hamlets and all other London boroughs. As always, we will be on hand to help with our expert management and lettings services.