MercoPress. South Atlantic News Agency

London's luxury rentals get an unexpected boost

London is the most expensive rental market, topped only by Hong Kong

London's luxury rental market, already strong and becoming stronger, is getting a further boost from an unexpected source: the U.S. credit crunch.

Real estate experts say that many U.S. financial institutions are redeploying staff to London to oversee operations in Europe and Asia during the economic turmoil. And their arrival is increasing demand for the city's already scarce top-end rentals. Rentals in the first quarter of 2008 for properties costing £1,000, or $1,990, a week or more rose by 10 percent from the same period last year, according to Liam Bailey, head of residential research at Knight Frank real estate in London. "Head honchos from banks and hedge funds are being flown in from cities such as New York to oversee operations over here, which has fueled demand," he said, noting that the city's time zone makes it easy to do business in both the United States and Asia. Last year, rental prices at the upper-end of the market rocketed by 15.4 percent, after a 6.8 percent increase in 2006, according to Knight Frank. This year, the agency is forecasting more modest rental growth of about 5 percent. London has long been ranked among the most costly places to live - and to rent. Earlier this year Forbes magazine put it as the fifth most expensive rental market, topped only by Hong Kong, Moscow, Tokyo and New York. In the most sought-after neighborhoods of central London - including Belgravia, Knightsbridge, Kensington and Mayfair - a two-bedroom apartment, starting at 800 square feet, or 74 square meters, typically costs anywhere from £650 to £5,000 a week to rent, depending on location, condition and a number of other factors, according to Anshul Raja, director of rentals at Chesterton real estate in Knightsbridge and Belgravia. A three-bedroom apartment of about 1,200 square feet will rent for £1,000 to £10,000 a week. Houses in these areas, which are typically at least 2,000 square feet, rent for £1,500 to £8,000 a week. "London is a very overpopulated city, with a lot of people renting," said Tim Hassell, rental manager of Foxtons real estate in Sloane Square. "At the upper end of the market, money isn't an issue; tenants don't mind if they're paying £2,000 a week or £3,000, or even more." Such tenants include young Russians, Middle Easterners, bankers and celebrities, Hassell said. Around half of luxury rentals are to private individuals, with the remaining properties let to companies. Most leases will be for at least one year, he said. And while there has been a slump in the buy-to-let sector at the lower end of the market, the upper end remains relatively unaffected, said Raja of Chesterton. Concerns about falling real estate values are giving the rental market a further boost, according to Holly Morris, an agent at the Wetherell agency in Mayfair. Increasingly, people who have sold their homes in recent months and are not sure where the market is headed are choosing to rent a home until house prices stabilize, she said. An example of a recent rental is a triplex apartment in a historic property built in Mayfair in the 1720s. At £4,000 a week, the 3,039-square-foot furnished apartment in Upper Grosvenor Street has three bedrooms and a roof terrace. It also comes with a custom-designed Boffi kitchen, oak flooring and an integrated audio system. The tenant moved in early last month. The property's quality fittings and furnishings, which include C.P. Hart bathroom fittings and a limestone staircase, made it a popular choice, said Morris at Wetherell. One property still on the market is a house in Herbert Crescent in Knightsbridge that the King Sturge agency has listed at £7,000 a week. The 3,543-square-foot furnished house has six bedrooms, five bathrooms, a reception room and a media/home cinema room, spread over four floors. The reception room features striking lights from the British designer Andrew Martin. The property also has its own garage. "At this end of the market, tenants expect high-level gadgets and appliances, including German brands such as Miele. American-style fridges and range cookers are also very popular," said Caterina Swain, a senior executive at King Sturge who is marketing the property. Nearby, Chesterton is representing a 3,750-square-foot furnished maisonette at 18 Lowndes Square for £6,000 a week. The four-bedroom, five-bathroom Georgian property comes with access to an exclusive communal garden and the master bedroom opens onto a terrace. Harvey Nichols department store stands at the northern end of the square, with Hyde Park a short walk away. In South Kensington, Foxtons is offering a three-bedroom, 2,814-square-foot apartment at £3,750 a week on a lease of at least 12 months. The property, which is close to the shopping mecca of High Street Kensington, comes with a reception room and dining area that features a custom-designed, stalactite-shaped chandelier from the Italian lighting company FontanaArte. "This sort of apartment is likely to appeal to either single professionals or couples who want the equivalent of a suite at The Dorchester - with luxurious but simple and tasteful furnishings," said James Clarke, rental manager at Foxtons in South Kensington, who is marketing the property. By Sara Seddon Kilbinger - International Herald Tribune