Rental demand should rise further in 2012

The London rental market has got a lot going for it. Property investors from around the world are flocking to the English capital with a view to snapping up properties in anticipation of future rental price growth, thanks to high demand for houses and flats to rent in London.

The city has long appealed to landlords looking for a safe buy-to-let property investment, particularly in recent years, on the back of rising rental returns, as rental values go from strength to strength.

Despite Britain's weak economic outlook and growing European woes, rental prices in London have been increasing due a surge in demand from tenants. This has been mainly driven by the fact that many would-be purchasers have had difficulties in raising the necessary mortgages required to buy a home.

"There are grounds for optimism because despite the bleak [economic] picture, many people have been excluded from buying, so there is an increase for rental," said Yolande Barnes of Savills. "The lack of supply has put pressure on rentals so yields are expected to increase."

With the 2012 Olympic Games drawing closer, demand for rental properties in London will almost certainly increase further next year; an attractive proposition for active property investors.

Many landlords are asking huge rental prices during next summer's Olympics. In some cases, asking rents are reportedly already rocketing to six times the normal value. London-based estate agents Foxtons is one that is advertising Olympic lets at record-breaking prices, including a penthouse in Knightsbridge that is being advertised at £100,000 a week as an Olympics let.

Property expert Jane Marr of J Marr Group said that searchers for property for sale in London will be as popular as ever next year as London is considered a "safe haven" for property investment. This is particularly the case at the high end of the market, including houses for sale in St Johns Wood as well as flats for sale in St Johns Wood, Chelsea and Mayfair, among other primary locations.

"Compared to other European cities, London is very attractive and demand for luxury homes is still rising. We asked if the rich were getting richer in a recession and from here it certainly looks that way," she explained.

In the prime London property market, the interest is mainly from overseas nationals, especially those from China, Russia and Europe. This has certainly been the case as far as demand for flats for sale in Primrose Hill is concerned.

Andrew Ellinas of Sandfords commented: "Overseas buyers are particularly keen to invest in the Capital especially since the Eurozone crises, with many properties sold going to cash-rich Europeans looking to move some of their wealth into the stability of the prime London property market."

Flats for sale in Little Venice have also attracted a high level of interest from international purchasers, with some homes being sold for sealed bids of in excess of asking prices.

Christian Harper of estate agency Oliver Finn told the press: "I believe the dramatic increase in prices has been fuelled by both a shortage in available stock and foreign investment. We are back to sealed bids and high levels of activity due to a worrying shortage of new instructions."

High demand for flats for sale in London pushes prices higher

UK home prices fell for the tenth successive month in October and are down 3.2 per cent year-on-year, marking an increase on the 2.6 per cent annual decline recorded in September, according to latest figures supplied by the Land Registry.

The average home price in October fell by £1,462 to £159,999 month-on-month. Average residential property prices peaked at £166,568 in August 2010.

Residential property prices fell across the country, with the exception of London, which is being supported by a lack of housing supply and strong national and international demand for houses and flats for sale in London.

Demand for property in London is being driven by the country's political stability. Consequently, more mortgage lenders are now looking to lend to those homebuyers seeking to purchase a home in the capital, simply because the market in the capital is seen as safe a bet.

"Over the past two years, there has been a noticeable increase of foreign private banks. London is seen as politically safe and the property market in particular is viewed as robust" says Mark Harris, director of SPF Private Clients, a high-end mortgage broker.

Interest in primary property for sale in London in desirable locations, such as Mayfair, Regent's Park, Chelsea and Marylebone is particularly robust at the moment.

A general shortage of flats and houses for sale in Marylebone, in relation to high demand has forced local property prices significantly higher in recent years.

The same could be said as far as houses for sale in Marylebone Village are concerned, as well as flats for sale in Marylebone Village, due to the area's high popularity.

"London's worldwide reputation as a safe haven for money in a turbulent financial climate has been reinforced by the latest growth figures for the prime property market," said Andrew Ellinas of Sandfords. "Property prices have now risen by nearly 40 per cent since the post-credit-crunch low in March 2008, bringing prices well above the 2008 peak."

The property market in Marylebone, like much of prime London, is being supported by mainly wealthy overseas purchasers buying either a primary or secondary residence in the capital.

London-based estate agents Hamptons International report that overseas nationals make up as much as 75 per cent of all buyers of prime properties in central London at the moment, which represents a significant rise on the 50 per cent or so recorded in 2007.

With restricted housing supply and high demand from wealthy international buyers unlikely to slow any time soon, property prices in and around Marylebone are likely to appreciate further moving forwards.

In fact, property prices are likely to continue rising across prime parts of central London. Savills project that prime property values in the capital will increase by 22.7 per cent in the five years to 2016.

"Prime real estate has proved itself a stable safe deposit in uncertain times and in an investment world searching for yield and security, the five-year outlook for prime property is compelling," says Yolande Barnes of Savills.

The ripple effect in London

The well reported boom in prime central London in the past two years has left many property sellers, and of course estate agents, elated, as a lack of supply against growing demand has pushed prices across most parts of the capital’s best central areas higher.

The Savills Prime Central London Index showed average price growth of 87 per cent in the six years to mid-2011, with the highest capital growth recorded in Mayfair, to the delight of Mayfair estate agents.

Savills report that Mayfair outperformed the rest of the capital on price growth, up 117 per cent on average in six years,

Residential property prices in London have demonstrated a distinct spatial pattern over time, rising initially in a cyclical upswing in prime central London before spreading out to secondary locations.

Despite the recent lull in the UK property market, Savills claim that there has been a recovery in the market in many parts of London, with mainstream prices having increased by 25 per cent, on average, in the past six years.

Property consultants Knight Frank have identified a number of hotspots in London, including many secondary areas, which are expected to boom in the next few years.

The company expects prices to increase by an average of 30 per cent in prime areas by the end of 2015 but with some neighbourhoods seeing far greater gains.

Grainne Gilmore, head of UK residential research at Knight Frank, said: "The prime London property market is buoyant, but there are pockets of London where the opportunity for development, and other factors such as improved transport infrastructure, gentrification or regeneration, combine to produce real opportunities for housebuilders and ultimately for those in need of housing."

Many Paddington estate agents are bracing themselves for potential growth in demand for Paddington properties to both buy and rent, after it was outlined as an up-and-coming corporate hub.

Richard Kauntze, Chief Executive for the British Council for Offices, highlighted Paddington as one of a select few areas outside the main London business districts which is growing in popularity.

He said that attitudes towards Paddington, previously perceived as being "fringey", had "really changed with the Paddington Basin development," he commented.

"Some significant business office occupiers have moved in [to Paddington] and it is an area that is very close to the centre of London," Mr Kauntze added.

Rising demand for office space in Paddington is contributing towards the gentrification of the area and making it a more popular place to live.

"The capital continues to soar away and outperform the wider UK property market and is seen as the world's safest haven for bricks and mortar," said Andrew Ellinas of Sandfords.

He continued: "An acute stock shortage and unprecedented buyer demand in prime areas such as Regent’s Park and Marylebone is helping to underpin prices by as much as 10 per cent in the last 12 months."

But while many buyers compete to take advantage of excellent rental returns yields and the prospect for strong capital growth in areas like Marylebone and Regent's Park, some property experts believe that greater returns could be achieved in nearby areas that potentially offer greater room for growth.

Lisson Grove estate agents have long claimed that properties in Lisson Grove are cheap, in comparison to nearby areas, which also includes St John's Wood and Baker Street.

But whether more shrewd property investors will look beyond prime central London and invest in secondary locations is another matter. Only time will tell.

Primrose Hill property prices tipped to rise further

The property market in primary parts of London is widely expected to defy the anticipated downturn in the mainstream UK residential property market in 2012, according to various property experts.

The latest forecast from estate agent Knight Frank shows that property prices in prime central London, areas including Regents Park, Kensington, Primrose Hill, Knightsbridge, St John's Wood, South Hampstead, among others, will continue to climb next year.

Knight Frank project that prime central London prices will increase by an average of five per cent in 2012, before pausing in 2013 and rising by a further four in 2014. Cumulatively, the property consultancy believes that prices will appreciate by 24 per cent by the end of 2016.

Liam Bailey, Knight Frank's head of research, said: "Prices in prime central London are currently at an all-time high, despite which we believe there is scope for further price gains over the next 12 months, averaging 5 per cent across 2012."

Estate agents in primary destinations, including Mayfair estate agents and South Hampstead estate agents, generally agree that geo-political issues will continue to push overseas buyers into London, especially at the top end of the market, as the capital is seen as a safe haven.

Bailey added: "The reasons which have underpinned recent growth – a weak pound, renewed wealth-creation in emerging markets, the search for safe-haven assets and flight capital – all seem set to continue, at least in the short term, reinforcing our positive view for next year."

It is not just estate agents that are confident about the state of the central London property market.

According to research conducted by Jones Lang LaSalle, residential property developers are resolutely confident about the outlook for the market in 2012 and do not foresee a major impact from the global economic crisis.

Their latest survey found that 84 per cent of developers thought that central London apartment prices in core locations would increase next year.

Neil Chegwidden, Residential Research Director at Jones Lang LaSalle, who undertook the research, commented: "Our survey confirms that developers remain positive and confident about the outlook for the central London residential market despite the overhang of gloomy economic and financial market news."

Strong appetite from overseas buyers is seen as being the key to this projected growth in property prices.

There has been a major hike in demand for property for sale in Primrose Hill, for example, which is unsurprising, given that this is one of the most sought after parts of the city to live in.

Leading Primrose Hill estate agents, such as Sandfords, report that property prices in Primrose Hill have recorded double-digit growth in the past two years, mainly due to rising interest among people wanting to live in this area.

"Overseas buyers are particularly keen to invest in the Capital especially since the Eurozone crises, with many properties sold going to cash-rich Europeans looking to move some of their wealth into the stability of the prime London property market," said Andrew Ellinas of Sandfords.

With Primrose Hill perceived to be one of the most popular and safest places to live in London, Adam Feather, managing director of local estate agents, Robert Anthony, reports that demand among homebuyers to "buy property in Primrose Hill" has intensified in the past two years.

He added: "Primrose Hill's popularity has culminated in a rise in the volume of people looking to live in the area, fuelled by greater interest from buyers abroad."

"Primrose Hill property prices are now at an all-time high and look set to grow further," he concluded.

Fitzrovia estate agents achieve record price for local area

A new build home at Crabtree Place, the luxury development on Whitfield Street, Fitzrovia, recently achieved a record price of £1,500 per square foot for a residential property sold in Fitzrovia, a sought after part of central London.

The recent sale of the penthouse, situated within a derelict power station, which has been transformed into a small collection of seven triplex homes and apartments, has set a new level of pricing for Fitzrovia.

The one-off duplex apartment, accessible via a direct secure-access lift, has been impressively designed. The top floor apartment benefits from plenty of natural light from the wrap around terrace, which offers impressive views over London’s skyline and the treetops of Crabtree Fields below.

The penthouse offers impeccably designed space with state of the art audio-visual systems, under floor heating and discreet mood lighting to create a pleasant living environment.

The success of this property scheme supports claims by Fitzrovia estate agents that demand for properties in Fitzrovia is growing at a rapid pace.

John Ennis of Foxtons estate agents, the appointed estate agent for Crabtree Place, said: "Combined with its excellent location near the vibrant hubbub of Charlotte Street and Fitzrovia, it is no wonder we have applicants from every continent interested in this development [Crabtree Place]."

It is not just the market in Fitzrovia that is booming. With very few homes on the market, property prices in nearby Regents Park are also on the rise, supported by a high level of demand for property for sale in Regents Park, particularly from overseas purchasers.

"London is holding up well despite gloomy reports from the most of the rest of the UK," said Andrew Ellinas of leading estate agents Sandfords.

Harrods Estates, the luxury estate agents arm of the Harrods Group, has announced plans to head to Hong Kong in November to attend MIPIM Asia 2011, with a view to selling homes in Regents Park, among other prime central London locations, to buyers in the Far East.

The weak UK pound and increasing property prices have made the London property market extremely attractive to South East Asian buyers, with popular areas like Regents Park and Fitzrovia, amongst those reaping the rewards.

Figures provided by estate agency Savills reveal that purchasers from South East Asia accounted for 35 per cent of new development sales in London, with the Chinese particularly active in London at the moment.

Shirley Humphrey, Sales and Marketing Director for Harrods Estates, said: "This is a particularly interesting time in the Central London property market. Whilst traditional buyers and renters from North America and Europe are finding their domestic economic situations constricting their property investment decisions, it is precisely the domestic environment in South East Asia that has shown a 15 per cent increase in sales to the [London] region by Harrods Estates over the last six months. In 2010, 40 per cent of our sales came from Asia."

High property prices and a lack of mortgage liquidity are forcing more and more people into renting. With demand for property to rent in Regents Park at a historic high, rental prices are increasing at a rapid rate; an attractive proposition for buy-to-let investors, including those in the far East.

More properties in Little Venice needed to satisfy high demand

The Government is being urged to do more to increase the supply of properties in popular parts of the capital, such as Little Venice, a tranquil canal area in West London, near Maida Vale, because there are nowhere near enough homes to cater for high demand for both properties to rent and buy.

The Home Builders Federation (HBF) has told the Government to "stand firm" on its planning proposals to help property developers increase the supply of new homes or risk a 'house building ice age'.

Speaking at the recent Housing Market Intelligence conference HBF executive chairman Stewart Baseley said the "complete and utter nonsense" of the anti-development lobby must be ignored or a generation of people will be denied access to the housing market.

Located just north of Paddington, Little Venice, home to a number of waterside cafes, pubs and eateries, is a highly popular place to live, illustrated by the high number of prospective purchasers and tenants registering with Maida Vale estate agents with a view to securing a property in nearby Little Venice.

But with so many people actively looking at property for sale in Little Venice with a view to buying a sought after home, property prices in the area are widely expected to increase in the short to medium term.

Andrew Ellinas of Sandfords, a leading local estate agent, believes that demand will continue to grow, while supply is expected to remain sluggish, which should place upward pressure on residential property prices in Little Venice, among other prime parts of the capital.

"The Centre for Economics and Business Research [CEBR] believes the acute housing shortage will combine with pent-up demand from people who have deferred buying for fear prices will drop still further. Prices will rise as a result," said Mr Ellinas. [CEBR] predict a 16 per cent rise [on average across London] by the end of 2015."

In addition to a shortage of properties for sale, a lack of property to rent in Little Venice is also expected to cause further growth in rental prices in the area.

The latest data released by LSL Property Services, which owns various estate agents and letting agencies, shows that the average rental price of a home in the private sector in England and Wales increased by 0.7 per cent in September. Average rents in September hit a new high of £718 per month, led by growth in popular London districts, such as Little Venice.

David Newnes of LSL said rents were being pushed higher by growing demand from people seeking rental accommodation, partly because many would-be property purchasers are unable to access mortgage liquidity needed to buy a home, while the growing supply-demand imbalance is also having an impact.

"In many cases, buying a home is now cheaper on a monthly basis - provided renters can get past the stumbling block of the substantial deposit requirements," said Mr Newnes. "For the majority, saving a £25,000 deposit is a Herculean task as inflation and rents climb - and most would-be buyers are biting the bullet and prolonging their stay in increasingly costly rental accommodation."

He added: "As things stand, we won't see competition amongst prospective tenants diminish without a substantial expansion in the supply of rental properties available on the market."

Little Venice is a charming and tranquil area away from the hustle and bustle of nearby central London. But unless greater investment is made in the local area to increase supply and meet growing demand for accommodation requirements, sale and rental prices will simply continue to grow.

Dominic Agace, CEO of M Winkworth PLC, commented: "Rents continue to rise as the fundamentals continue to put upwards pressure on rents. Simply put, investment in the sector is not keeping pace with growing demand for accommodation requirements."

Properties in London appeal to overseas buyers

Despite the wider UK housing downturn, there is a corner of England which continues to boom, on the back of greater demand, particularly among overseas nationals.

This corner of the country is Prime Central London which covers areas such as Belgravia, Chelsea, Hyde Park, Kensington, Knightsbridge, Mayfair, Notting Hill, Marylebone and St John's Wood. The average price of property in these areas is currently £3,968,300 – over 10 times the all-London average, according to property consultants Knight Frank.

Prime central London is a highly desirable place to live; popular with Brits and overseas nationals. There is an array of different types of residential properties, as a consequence of the wide range of residential architectural changes that have taken place over the years. There is a fine mix of houses and flats, from Victorian terraces to contemporary apartments.

Growing demand from rich international buyers is helping to create a new global super class of property in prime central London, including St Johnn's Wood.

Leading St John's Wood estate agents, like Behr & butchoff, Sandfords and Winkworth, have seen a hike in demand for property for sale in St John's Wood as well as property to rent in St John's Wood, especially from European buyers looking to escape the Eurozone turmoil.

Andrew Ellinas, Director of Sandfords, said they have: "seen a surge of interest in property as a result of the Eurozone crisis, with many properties sold over the last month going to cash-rich Europeans as well as those from the Far East."

Historically in Britain, residential property prices demonstrate a distinct spatial pattern over time, rising initially in a cyclical upswing in prime central London, then wider London and the south east, before spreading out over the rest of the country. This is known as the ripple effect.

Despite strong demand for homes in London, the supply of new residential properties coming onto the market in the area remains at an historical low, placing upward pressure on property prices in the capital, despite stringent mortgage lending conditions.

Ed Mead, Director of Douglas & Gordon, said that destinations in prime Central London "are the sort of areas that have been appealing and seem to be going up in value, when everything else has been flat or going down."

Mr Mead added that the appeal of these districts lies in the fact that they are relatively safe areas.

As well as increasing prime central London property prices, rents are also on the rise, which is a highly attractive proposition for buy-to-let property investors.

Unsurprisingly, there is evidence to suggest that property investors are indeed returning to the London housing market in droves, tempted by a sharp rise in rents, increasing property values, a shortage of new build homes coming onto the market and less severe buy-to-let mortgage borrowing conditions.

Gary Patrick, regional sales director of London-based house building firm Barratt London, told the press: "Rental returns and the potential for capital gain in the London property market have been convincing motivators for both domestic and international investors to add to their portfolios."

Central London Estate Agents - Property for Sale in Marylebone & Mayfair estate agents

Tenants expect higher standards as rents boom

With demand for rental properties in London going from strength to strength, most estate agents project that rental values will continue to rise in the coming months, with the greatest growth anticipated in prime central London, where various property consultants expect average rents to increase by as much as £15 per week to £1,052 by the end of this year.

This translates into an additional £780 a year for tenants that agree to the increase. If accurate, tenants in the capital are likely to be paying 30 per cent more than they were at the trough of the market in December 2009, when weekly rents stood at £809.

The latest data from buy-to-let mortgage specialist Paragon shows that landlords are benefiting from a booming rental market, with more than a third - 34% - of landlords reporting that they have increased their incomes from their property portfolios. Figures in July revealed that rents had risen above the £700 per month mark for the first time ever in the UK.

"Tenant demand has been growing for a number of years, but in recent months it has accelerated considerably," said Nigel Terrington, chief executive of Paragon.

However, with higher rents come higher expectations, according to Adam Feather of Robert Anthony, the Hampstead estate agents, which offers property to rent in Primrose Hill and property to rent in St John's Wood as well as Hampstead, Swiss Cottage and Golders Green.

Mr Feather says that more professional landlords in the capital should consider appointing a London property management firm to ensure that tenants receive a good value-for-money rental service.

"Tenants in general are now paying more money in rent and as a consequence now expect an even better service, which means that they have come to expect a 24/7 management service when they rent a property. Unfortunately, for most landlords it is almost impossible to live up to their expectations, which is why a professional property management company is ideal."

These days more and more tenants request managed properties as it allows a more professional service, removing the emotion from both sides, according to Foxtons.

In a direct message to landlords, a statement on the company's website says: "Only you know how much time you can spare to deal with your tenant's telephone calls and the resulting work.

"Our comprehensive property management service is designed to give you peace of mind and relieve you of the commitment of being a full-time landlord, which is why we look after over 5,500 properties on behalf of clients both in London and around the world."

Leading Central London estate agents, Sandfords, renowned for offering a premier service for both tenants and landlords, wisely advise that in order to get the best return on their investment in the fiercely competitive London premium lettings market, 'landlords must offer their tenants the highest levels of service'.

This ultimately means a professional property management package that includes services such as collecting rent, handling administration as well as assistance with more complex issues and the provision of a 24-hour emergency helpline.

Landlords are currently thriving from booming rents, but in order to maintain the good times, they need to properly look after their property investments, which includes their tenants, which is why it is necessary that they go the extra mile, ensuring that their property is well looked after from the moment a tenant moves in.

Properties in London in high demand

Whether it is a property for sale in London or property to rent in London, demand for homes in the capital is at a historic high, particularly in primary locations in the heart of the city.

Central London estate agents are receiving multiple viewings and offers per property in London, whether to let or for sale, thanks in part to greater appetite from domestic and international buyers and tenants, which in turn is pushing property prices and rents higher.

As far as the sales market in London is concerned, Adam Feather, head of residential sales at Robert Anthony estate agency, commented: "Properties in London are attracting a high volume of enquiries and actual viewing, with many homes being sold for in excess of the asking price, due to high demand and a lack of housing stock.

"Many people see London as a good place to buy property. The problem we have is that we do not have anywhere near enough homes for sale in relation to existing demand. The supply-demand imbalance is greatest in the heart of the city. Consequently, prices will continue to appreciate in prime areas."

Overseas buyers are particularly keen to invest in London, especially since the Eurozone crises, with many properties sold going to cash-rich Europeans looking to move some of their wealth into the stability of the prime London property market. Property for sale in Marylebone, for example, has been attracting affluent buyers for a number of years.

"Demand for properties priced between £1.5 and £4million is intense, resulting in properties selling within an average of just seven days in Marylebone," said Andrew Ellinas, director at Sandfords Central London estate agents. "For those looking to secure their offspring in good educational establishments, Marylebone has well regarded business schools, increasing its popularity with buyers from the UK and overseas.

Many overseas nationals also want to buy homes in London for investment purposes, with a supply shortage often pushing property prices and rents higher.

A significant hike in tenant demand is increasing rents across London, which is great news for buy-to-let investors - domestic and international - seeking to capitalise on higher rental returns.

Fresh data released by buy-to-let lender Paragon shows that more than a third of landlords – 34 per cent - experienced increases in rental income in the third quarter of 2011, compared to 29 per cent in quarter two.

Just over 10 per cent of landlords said their rental income had increased by between two per cent and four per cent, whilst 13 per cent of landlords increased rents above that level.

Nigel Terrington, chief executive of Paragon, said: "Tenant demand has been growing for a number of years, but in recent months it has accelerated considerably.

"With tenant demand only looking to increase further in the coming months, landlords are likely to continue to experience increases in their rental income, especially given that 49 per cent of landlords said they expect demand to further increase in the next 12 months."

In spite of recent growth in rental values in London, research by Oxford Economics suggests that rents will climb further moving forwards.

According to the think tank, home ownership across England, particularly in London, is set to fall in the next few years, effectively meaning that around one in three people will be renting, which in turn should place upward pressure on private sector rents.

Indeed, average rents in the private sector are set to rise by 19.8 per cent over the next five years alone, driven largely by the growing demand caused by a lack of affordable mortgage deals for would-be first-time buyers.

Commenting on the findings of the Oxford Economics Research, the head of the Housing Federation David Orr, said: "For the millions locked out of the property market the options are becoming increasingly limited as demand sends rents rising sharply and social homes waiting lists remain at record levels."