Demand For Rental Property Remains Firm

Almost half of the landlords - 44 per cent - surveyed in Paragon’s latest Private Rented Sector Trends survey for the first quarter of 2012 said that tenant demand was continuing to grow.

The results of the quarterly survey carried out by the specialist buy-to-let lender also revealed that just seven per cent of landlords thought that during Q1 tenant demand declined and 46 per cent said that levels remained stable.
Moving forward, 53 per cent of landlords surveyed believe that demand for rental accommodation will continue to grow and 36% said that it will stabilise.

"Levels of tenant demand have for the most part remained steady throughout the first quarter of the year. This shows the continuing importance of the private rented sector as the tenure of choice for many people," said Nigel Terrington, chief executive of Paragon Group.

Demand is generally greatest for property to rent in London, particularly sought after areas like Prime Central London, which has shown the strongest rental price growth over the past twelve months, up 3.2 per cent.

Despite an anticipated slowdown in rental price rises in the short term, a general housing shortage in the capital, including a lack of property for sale in London, is expected to underpin a hike in future rental values, on the back of an almost inevitable rise in demand, in light of stringent mortgage lending conditions.

Lucian Cook, director of Savills residential research, said that his firm have identified a clear link between FTSE volatility and rental values in central London and this pattern has been "compounded by reduced corporate budgets."

But although in the short term the prime rental markets in London and the South East will be highly dependent on sentiment in London's financial and business services sector, Savills "expect values to be underpinned by constrained stock levels, particularly in the core prime sector," said Mr Cook.

There is a particular shortage of property to rent in Marylebone, Mayfair, Chelsea, Kensington, among other prime central London locations.

"Marylebone, with its wealth of elegant properties and desirable High Street, has been attracting affluent people for a number of years. Demand for properties is intense," said Andrew Ellinas, director of leading estate agents Sandords.

But while London's super prime property markets and prices continue to strengthen, the city’s second-tier markets are also growing increasingly popular with overseas investors, due to greater tenant demand, according to Ingrid Skinner, managing director of house builder Taylor Wimpey in Central London, who recently returned from Hong Kong to promote homes in London.

Skinner remarked: "Boroughs such as Camden, Highbury and Islington, the Royal Borough of Kensington & Chelsea and Hammersmith and Fulham can be seen to be prudent investments. Entry level pricing is lower and rental demand continues to be strong and the excellent transport links mean that purchasers own a property that is still very much in Central London."

Demand is particularly strong for property to rent in Primrose Hill, which is located in the London Borough of Camden, a short-distance from London’s West End.

But anyone looking at houses and flats to rent in Primrose Hill will find little choice available, and until the level of new homes coming onto the market starts to increase, this situation is unlikely to change anytime soon, pushing local rental prices higher.

Central London property management services are highly sought-after

Investment in buy-to-let properties is growing more popular, particularly for people aiming to augment their pensions or beat poor returns on their savings in the bank. Investing in buy-to-let property can prove an excellent way to make money, particularly in the current climate, with demand at an historic high.

The latest monthly survey from lettings firm LSL Property Services shows that average rents increased by 3.5 per cent in February compared to the corresponding month last year, and look set to rise further in the medium term.

David Newnes, a director of LSL, commented: "Tenant demand is underpinning rental inflation."

However, many people fail to appreciate that becoming a landlord or expanding a property portfolio comes with added responsibility. Effective property assistance is essential, but can prove time consuming, especially for part-time or temporary landlords. A lack of professional organisation can leave some tenants paying high rental prices when securing a property to rent in London, but receiving an inadequate property management service in return.

Is it worth paying for a Central London property management firm to professionally manage a property?

Well, it seems that a growing volume of landlords seem to think so.

"Times are changing and fewer tenants are prepared to put up with bad housing conditions or poorly managed properties", said professional London-based landlord, Reiss Degale.

Mr Degale currently owns 16 homes in London and is regularly looking at property for sale in London with a view to adding to his property portfolio.
According to a survey by property investment specialists Assetz, over three quarters - 76.8 per cent - of UK property investors are considering buying additional investment properties over the next 12 months, in order to take advantage of growing rental demand and yields.

"The yield a landlord's rental property generates is a key indicator of how well the property is performing and is an essential part of the landlord's overall business plan," said John Heron, managing director of Paragon Mortgages.

Like Degale, many more landlords are now taking their residential investments far more seriously by adopting a professional approach to renting, particularly when offering houses to rent in Primrose Hill, Marylebone and Chelsea, among a host of other primary areas in the capital.

Phil Jones of Robert Anthony estate agents remarked: "More landlords appreciate the benefits of providing their tenants with a professionally managed property service. This is due to the fact that they recognise that a property is a major asset that must be carefully managed in order to maximise returns."

A number of Central London estate agents offer a property management service, including leading letting agents Sandfords.

The company report that a growing number of high-end private tenants expect a round the clock service when they rent a home in London and as a landlord it can be difficult to live up to their expectations."

Sandfords states: "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."

Properties in St Johns Wood and Primrose Hill growing increasingly popular

The expensive prices of homes in central London are leading more buyers to seek alternative addresses to get more for their money. With average prices slightly cheaper, some people have started moving away from prime central London to surrounding regions on the edge of the city centre, reflected in greater demand for property for sale in St Johns Wood and Primrose Hill.

Trevor Abrahmsohn of Glentree Estates said: "30 years ago, St John's Wood was the first leafy suburb outside the Mecca of the West End, with its glittering array of shopping facilities. If you wanted to live in North West London proximity to the West End was crucial and St John's Wood provided an excellent, yet expensive, place to live."

Thirty years later and very little has changed as far as demand for homes in St Johns Wood and Primrose Hill is concerned.

The one thing that all Primrose Hill estate agents have in common is a lack of stock to cater for the high number of applications registering to buy homes in Primrose Hill.

Houses for sale in Primrose Hill are like gold dust in that there are very few on the market at any one time, regularly pushing up property prices in the process.

Andrew Ellinas, director of leadig estate agents Sandfords, said: "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. Restricted supply makes it very likely the trend will continue."

In fact, given the existing shortage of homes in relation to demand, almost any property for sale in London is currently likely to attract a high rate of attention from homebuyers. This is reflected in the fact that the level of transactions in the residential property market hit an 18-month high in February, according to the Royal Institute of Chartered Surveyors.

Alan Collett, housing spokesman for RICS, said: "With the recent upturn in activity … it seems that a renewed sense of optimism may be slowly returning to the property market. Chartered surveyors' price predictions were more optimistic in almost every area of the country in February."

It is not just the property sales market that is booming in the capital. Many would-be purchasers cannot gain a foot on the UK housing ladder due mainly to stringent mortgage lending conditions, forcing them instead to look at property to rent in London; an attractive proposition for landlords, many of who are benefiting from higher rental returns.

Unsurprisingly, the latest quarterly survey of Private Rented Sector investors carried out by the Young Group shows that London remains the most desirable place to own a buy-to-let investment. A total of 85.1 per cent of respondents to the survey said that they expect rents in the city to continue to rise throughout 2012.

Adam Feather, senior sales negotiator at Foundation Estates, commented: "Low availability of rental homes in the capital has meant that landlords are experiencing fewer void periods and higher rents. Rental values in London have risen significantly in recent years; increasing by about 11 per cent in 2011, with further growth anticipated this year."