Residential property rents are growing faster than sales prices in London with the private rented sector likely to account for one in five households by the end of 2016, reports Property Wire.
In Greater London average residential rents increased by 16% in 2010 and demand from overseas corporate clients is on the increase, the research found. It also shows that rents in East London have already risen by 4.3% in the first three months of this year and by 3.6% in North London.
These increases mean that rental values in St Johns Wood and Regents Park are now 15% above the peak prices of 2007.
The report points out that the cost of entering the property ladder in London for first time buyers is preventing many doing so and they are opting to rent instead. On top of this a dearth of rental stock is pushing up rents and the future prospects for rental growth are very strong.
Central London rents are traditionally driven by demand from corporate tenants from overseas which focuses on the high value prime areas and which has been on the increase since the recovery in the financial and business services sector in 2009, the report also shows.
Price growth has been particularly pronounced in locations where renewed City confidence has translated into boosted demand for good rental property, both from domestic and international tenants.
The current economic conditions means it is probably better for first time property buyers to rent rather than purchase, according to Ducalian.
Timothy Lambert, head of consulting at the company, noted that it is a “very uncertain time” for those trying to get on the property ladder.
“I would advise people new to property to be very cautious at this moment in time,” he said.
“Make sure you are totally aware of what debt you are taking on. A two-year fixed-rate mortgage may look good now, but when this product comes to an end in two years’ time the rate is likely to be much higher.”
Mr Lambert pointed out that the monthly payment will not decrease any time soon, so first time buyers should ensure they can “easily afford” their mortgage repayments.
His comments come after research from Moneyfacts.co.uk revealed that the number of UK mortgage offers made available to applicants with small deposits has started to increase.
First Time Property Buyers News
Renting is becoming increasingly popular, according to research by the Association of Residential Letting Agents.
In ARLA’s survey of Q4 2010, 71% of landlords asked said they felt renting was more popular now than a year ago. In Q4 2009, the figure was just 35%.
And, when asked about attitudes to renting and whether consumers would rather buy than rent, the majority of respondents (67.2%) felt that people were being forced to rent – a slight drop on the previous quarter (71.6%), but still up on Q4 2009 (54.2%).
Ian Potter, operations manager of ARLA, said: “Our research suggests that, while more and more people seem to be renting post-recession, for many this is through need rather than choice – a trend that will likely continue as long as the demand for homes outstrips supply.
“Further, with the average age to buy a first home now reported to be 35, it’s also possible that renting will become the norm for more people than ever before.
“What is important for both ‘reluctant tenants’ and those who rent by choice, is to conduct thorough research before making a move. While there are many benefits to renting or letting a property, as there is no Government-led regulation, things can and do go wrong.
Increasing numbers of tenants appear to be struggling to make rental payments, according to letting agents.
According to latest research from the Association of Residential Letting Agents (ARLA) in the fourth quarter 2010, 40 per cent of ARLA members reported an increase in tenants struggling to meet rental payments in the preceding six months – a rise from 35.9 per cent in Q3 2010.
This is the first time the number has increased in 18 months, suggesting that job losses and pay cuts are beginning to take hold, causing tenants to have difficulties.
The situation was least noticeable in central London, where just under a third (27.9%) of members reported an increase, compared with the rest of the UK (46.4%).
Ian Potter, Operations Manager at ARLA, said: “At the beginning of last year we predicted that the number of tenants having difficulties paying rent would increase and unfortunately, this seems to be the case today.
“It is a situation which can have serious repercussions throughout the PRS as, without guaranteed rent income, landlords may also have problems paying mortgages. At worst, it may result in a rise in repossessions.
“While it is difficult for landlords to predict whether current or prospective tenants will hit financial difficulties, our research highlights the importance for landlords or agents to implement a thorough selection process and to conduct reference checks on potential tenants – and to consider the benefits of rental protection insurance.
Owners of buy to let buildings may be sensible in keeping their rental rates at the current level, LettingFocus.com has advised.
David Lawrenson, private rented sector expert at the organisation, commented that any landlord who pushes the rent too high could get stuck with long void periods.
“The sensible landlords will always try and be a bit cheaper than the market [average] if they have got any sense; if you get too greedy then people will just leave and then you have got the property being empty, the hassle of having to recruit a new tenant or you might have the costs of hiring a letting agent,” he pointed out.
It “makes sense” not to be greedy “because ultimately it ends up costing you more than you had planned”, Mr Lawrenson said, so looking at the typical prices for property to rent in London and other areas will help landlords work out “what the market will bear locally”.
London Property to Rent
Shared ownership and flatsharing schemes are increasingly becoming more popular.This is the view of Matt Hutchinson, director at SpareRoom, who pointed out that the number of adverts placed by individuals looking for accommodation has outstripped ads for rooms available – the first time this has happened since the site was launched in 1999.
“I also think there has been a shift in the market,” he commented.”We have had a spike in people taking in lodgers recently and that meant at the beginning of the year that there [were] an awful lot of rooms around and people could take their pick of rooms, but as a lot of those people have found lodgers, the rooms aren’t available at the moment.”
He noted that a spike in demand for property to rent in London has come at the same time as a “bottleneck in rooms”, which is making the process of finding somewhere to live “very competitive”.
Mr Hutchinson’s comments follow research from LSL Property Servies showing that average rents have hit a record high for the third month in a row.
London Property to Rent
The issue of home security is one of many health and safety issues for landlords, but the British Insurance Brokers’ Association (Biba) has suggested that homeowners invest in industry-approved locks and alarms.
“The locks you get are important – make sure you’ve got the industry-approved ones because then you can get a discount on your insurance,” suggested Graeme Trudgill, technical and corporate affairs executive at Biba.
“Have them fitted by a proper fitter and, if the budget permits, go [for] an alarm system as that is an extra deterrent.”
Off shore landlords with property in London will want peace of mind with regard to their overseas buildings, so it is equally important to have adequate insurance on homes to ensure a loss of valuables will not put them out of pocket, Mr Trudgill added.
His comments follow research by Mintel, which found less than half (46 per cent) of homeowners have protected their properties against the risk of burglary with security measures such as extra window and door locks.
Health & Safety News.
The issue of home security is one of many health and safety issues for landlords, but the British Insurance Brokers’ Association (Biba) has suggested that homeowners invest in industry-approved locks and alarms.
“The locks you get are important – make sure you’ve got the industry-approved ones because then you can get a discount on your insurance,” suggested Graeme Trudgill, technical and corporate affairs executive at Biba.
“Have them fitted by a proper fitter and, if the budget permits, go [for] an alarm system as that is an extra deterrent.”
Off shore landlords with property in London will want peace of mind with regard to their overseas buildings, so it is equally important to have adequate insurance on homes to ensure a loss of valuables will not put them out of pocket, Mr Trudgill added.
His comments follow research by Mintel, which found less than half (46 per cent) of homeowners have protected their properties against the risk of burglary with security measures such as extra window and door locks.
Health & Safety News.
Record demand saw 50,480 new tenants registered for rental accommodation in the second quarter of the year – a 16 percent increase since the start of the year, according to Countrywide, the UK’s largest letting agent and property services Group.
The survey findings also revealed that the government’s increase in capital gains tax does not appear to have deterred new first time landlords coming to the market, which has increased by 6 percent since the last quarter.
Fears that London landlords would be hit most by capital gains tax appear unfounded with a 4 percent increase in new landlords letting their properties.
The excessive level of demand has led to marginal increases in rental prices. As more families turn to renting, four bedroom properties have seen the highest increase, with the average rent rising to £1,090 per calendar month – a four percent increase compared to Q1 2010.
There is now an average of 5.5 tenants vying for each property compared to 4.9 tenants in the first three months of the year. The highest demand remains for two bedroom houses with 8.9 tenants vying for each property. This level of demand is having a significant impact on the market, with properties being snapped up within on average of two weeks – 3 days less that in Q1 and 6 days less in Q4 2009.
In London, two bedroom flats made up majority of the properties on agents books but demand outstrips supply and is pushing up rental prices in some areas, including Kensington, Chelsea and Islington.
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