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.