More tenants seek to rent properties in London’s peripheral areas

Demand for flats and houses to rent in central London looks to have slowed as a consequence of record high rents, research shows. 

Although demand for properties to rent in Fitzrovia, Marylebone, Belgravia, among other central London areas remains as high as ever, the surge in rental values in primary areas has priced many tenants out of living in the heart of the capital, forcing them to move out to cheaper regions instead. 

Virginia Skilbeck, Lettings Director at Douglas & Gordon, commented: “One of the biggest changes we are seeing is the reduced demand in prime central London as tenants are forced to move further out to save money.”

Douglas & Gordon report that while many corporate tenants continue to house themselves in the best and most expensive parts of central London, there is a growing trend of much greater demand from corporate tenants in the peripheral areas as many companies have reduced accommodation allowances.

This is fuelling greater demand for properties to rent in St. John's Wood, Regent’s Park, Primrose Hill, among other parts of Westminster and surrounding areas, which are located on the boarder of central London. 

Andrew Ellinas, Director at Sandfords, commented: “The City of Westminster has within its borders some of the most desirable real estate in the world from Buckingham Palace down, and includes most of Sandfords' home turf in Marylebone, Regent's Park, Primrose Hill and St John's Wood.”

Chesterton Humberts reports that its supply of rental properties in central London is 12 per cent ahead of this time last year, reflecting the fact that tenant demand has ‘softened’ as a consequence of cuts in corporate budgets, City redundancies and cheap mortgage deals which are encouraging more people to escape the rental market by purchasing property.

Nick Barnes, Head of Research at Chesterton Humberts, said: “The prime residential lettings market remains active, however with buy-to-let landlords bringing more stock onto the market, tenants now have a wider choice and consequently greater bargaining power. This is forcing landlords to be more flexible in order to attract and retain tenants, which is often resulting in downwards pressure on rents.”

Many landlords in central London have reportedly responded to lower demand from tenants by trying harder to renew existing tenancy agreements, without increasing rents. In some cases, they are reducing rents altogether.

Greater demand for rental properties outside of central London is helping to push rental values – currently at an historical high – ever higher. Consequently, more investors are expected to add to their buy-to-let portfolios, by acquiring more homes in periphery areas in order to take advantage of greater activity among tenants.

But with rents rising, there are growing signs that more would-be tenants are attempting to escape the rental market altogether, by gaining a first foot on the housing rung, according to new figures.

According to data compiled by LSL Property Services, the volume of debut homeowners in London almost doubled in the first four months of this year partly, due in part to easier access to mortgages.

The number of first-time buyers in January to April was 92 per cent higher than the same period last year, according to LSL Property Services. They paid an average price of £195,041, 3.6 per cent higher than a year ago, and took out an average mortgage of £154,233, almost twice the level in the rest of the country.

David Newnes, director of estate agency group LSL Property Services, commented: “Improvement in the availability of high loan-to-value mortgages allowed more first-time buyers to realise their dream of home ownership. Increased lender confidence has led to lower rates and a wider range of first-time buyer mortgages.”

However, the hike in first-time buyer activity could be short lived. This is because the rise in buyer demand is expected to push house prices higher, pricing many would-be purchasers out of the market, forcing them to rent property instead; an attractive proposition for landlords investing in property for the long-term.

Property Investment Prospects Remain Strong in Central London

Despite a marginal slowdown in demand for properties for sale in central London in late February and March, central London still remains one of the most desirable places to invest in property. 

Following an extremely good start to the year, the early spring period was rather disappointing for the housing market in central London, with the volume of serious applicants looking at houses and apartments for sale in central London falling. 

But the slight decline in demand for properties in central London was not due to the region no longer being a highly desirable place to live or invest in property, but was rather owed to the adverse weather conditions, according to Beaney Pearce.

In fact, the central London estate agents actually report that, with weather conditions rapidly improving, far more people are actively looking to acquire homes in central London once more.

“The absolutely ghastly weather accounted for a great deal of the reluctance [in demand from buyers], said a spokesperson for Beaney Pearce. “May and early June however have seen a very marked increase in activity with a healthy level of sales been agreed.”

Beaney Pearce’s findings are supported by the latest data from theRoyal Institution of Chartered Surveyors (RICS) which shows that residential property transactions rose in London, along with other parts of the country

Transactions in May were at their highest level in three-and-a-half years as house buyers took advantage of record low interest rates, according to RICS.

Surveyors sold an average of 17.9 homes in the three months to May – the highest level since January 2010, although still significantly below the levels hit six years ago. What’s more, sales are expected to continue their increase over the next three months with a net balance of 35 per cent more respondents predicting transaction levels will grow, up from 26 per cent.

Peter Bolton King, RICS Global Residential Director, commented: “May was an interesting month for the housing market. More people decided to get out there and view property and more transactions went through than in quite some time.”

The sharp rise in housing activity demonstrates that more buyers are taking advantage of favourable market conditions, helping to push property values higher in the process.

UK home prices rose by 2.6 per cent in the three months to May compared to the same period last year – the biggest rise since September 2010, according to Halifax.

The mortgage lender says that home prices rose by 0.4 per cent in May alone, though down from the 1.1 per cent rise recorded in April.

“Despite these recent signs of improvement in the housing market, the subdued economic background and the accompanying weak income growth continue to be a significant constraint on housing demand and activity,” said Halifax economist Martin Ellis.

In spite of Mr Ellis’ concerns, the investment prospects for the housing market across many parts of the country, particularly in London, look rather buoyant, supported by various Government schemes such as Help to Buy.

Very few investments compare to the safe nature of investing in central London’s property market, according to leading estate agents Sandfords.

Andrew Ellinas, Director at Sandfords, said: “Property in London has intrinsic value that is not dependent on buyer sentiment but its use as a place to live and do business in the most vibrant and cosmopolitan city in the world.”

With demand for properties in central London expected to increase further, far outstripping housing supply in the process, very few people would argue against investing in the capital’s housing market at the moment.

Greater Demand for Properties to Rent in North West London

Rental values in central London rose again during the first quarter of this year, a new report shows.

According to Cluttons, rents in central London rose by an average of 1.7 per cent in the first quarter of this year to reach £1,016 per week. Although this figure remains broadly unchanged from this time last year, Cluttons does report that the volume of applicants with higher budgets is in decline, a trend which is expected to persist over the coming months.

With rental values in central London now at a record high, on the back of greater competition for properties to rent in central London, a growing number of tenants are reportedly being drawn to peripheries of prime central London in zones 2 and 3. 

Sue Foxley, head of research at Cluttons, said: “A growing number of tenants to look further afield for cheaper accommodation. As a result we are seeing migration out to the periphery of prime central London , to zones 2 and 3, where rents are significantly lower than the prime core.”

With more tenants now spreading their wings to focus on lower priced properties in zones 2 and 3, as they seek to minimise outgoings, particularly as stubborn inflation continues to erode real incomes, demand for properties to rent in north west London is rising. 

St John’s Wood, Primrose Hill and Maida Vale are just some of the areas attracting a greater level of interest from renters, helping to push rental values in these areas higher in the process. This in turn is driving higher demand among investors for buy-to-let properties in these regions, reducing the volume of properties for sale in St John's Wood, Primrose Hill and Maida Vale in the process, according to leading estate agents Sandfords.

Andrew Ellinas, Director at Sandfords, commented: “The success of the prime central London property market over the last five years is creating a wave of price rises in nearby areas as people move further afield in search of value. Areas such as St John's Wood, Primrose Hill and Maida Vale, traditionally regarded as outside the prime central London zone, are now developing into an 'outer prime London' market.”

The recent rise in the volume of people looking to rent property outside of central London, means that more landlords in the heart of the capital are now becoming more flexible with their rents in order to lure tenants back into prime central London areas.

Competition to attract tenants has not been helped by a 12 per cent rise in housing supply in central London over the past year, according to Chesterton Humberts.

The company’s latest Prime London Lettings Report shows that buy-to-let continues to grow and now accounts for 13 per cent of all UK mortgages. But the figures also reveal that tenant demand in central London has softened due to a reduction in corporate relocation budgets, financial services redundancies and increased mortgage availability, placing downward pressure on rental values in the process.

Some landlords in central London have reportedly responded to recent trends by offering to freeze rents for tenants and sometimes even reduce them altogether.

Nick Barnes, Head of Research at Chesterton Humberts, commented: “The prime residential lettings market remains active, however with buy-to-let landlords bringing more stock onto the market, tenants now have a wider choice and consequently greater bargaining power. This is forcing landlords to be more flexible in order to attract and retain tenants, which is often resulting in downwards pressure on rents.”

Despite greater flexibility among some landlords in central London, as far as rents are concerned, some letting experts expect to see rental demand for homes in popular north west London areas continue to grow.

Adam Feather of north London based estate agents Robert Anthony said: “Although central London remains the most popular place to live in the capital, rents remain extremely high, and so it is easy to see why more people should want to rent a home in north west London instead.”

With rental values in north west London a fraction of those being commanded in prime central London, not many people would disagree with Mr Feather.