Managed Rental Homes in Central London are Highly Sought-After

With property prices and rental values continuing to rise, Central London estate agents have seen a surge in the volume of landlords actively buying properties in prime London in order to take advantage of attractive rental returns.

Fresh research by specialist buy-to-let lender Paragon Mortgages shows that property acquisition activity in the UK remained strong in the first quarter of 2012, during which period landlords increased their portfolio size by 1.8 properties, with prime central London by far the most popular place to buy property.

John Heron, Director of Paragon Mortgages, commented: "It has been a steady and progressive start to 2012. Whilst landlords are still benefitting from attractive market conditions, there is still a long way to go to meet the increasingly high level of tenant demand. More investment across the private rented sector is needed during the coming year to help to meet this demand."

The greatest supply-demand imbalance can undoubtedly be found in the heart of the English capital, partly because property prices remain out of reach for many would-be homebuyers, while mortgage finance is still hard to access for some, particularly first-time buyers, pushing more people into rental accommodation instead.

Unsurprisingly, 46 per cent of private rented sector investors are considering adding to their London portfolio in the next 12 months, according to the latest Young Group Index.

With rental demand and values soaring, Neil Young, chief executive of Young Group and Young London said that investors appear to be more committed to the London market than ever before.

"Confidence in the asset class remains strong, particularly for property in the capital where investors see future tenant demand as virtually guaranteed," he said.

But with rising rents comes greater expectations from tenants.

Despite the existing high level of demand for homes, landlords who are uncooperative and offer shabby properties will generally not be tolerated by most tenants who are now being forced to pay record high rents.

It is all very well adding to a property portfolio, but a landlord needs to take on the increased responsibility, which often proves far too time-consuming for many property investors, especially for part-time or temporary landlords.

Consequently, more property professionals with properties in and around Central London are now turning to London property management firms to provide professional organisation, according to Adam Feather of Robert Anthony estate agency.
 

"Many landlords now realise it makes more sense to hire the services of a property managing agent in order to help maintain their property and keep tenants happy, as well as reduce void periods and maximise rental returns," said Feather. 

Healthy property investment appetite in Prime Central London means that it is not just rents that are rising. High demand for homes in prime locations, including houses and flats for sale in Marylebone, Chelsea, Notting Hill, Kensington and Mayfair, among others, are generally expected to push micro property prices upwards.

According to the latest Young Index, property values in London are expected to increase by an average of 2.2 per cent between now and the first quarter of 2013, whereas investors predict that values across the rest of the UK will fall by 0.4 per cent over the same period.

Significant capital growth in recent years means that London now accounts for the vast majority of £1 million plus homes in the UK. 

"London accounts for two thirds of all UK sales above £1 million with 4,329 transactions in 2011 compared with 2,582 in the rest of the country," said Andrew Ellinas, Founder of leading Central London estate agents Sandfords.

Despite wider concerns about the economy, indications are that the property market in Central London will remain resilient and continue to go from strength to strength.

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."

London property market expected to defy national downward trend

It is booming and blooming in the UK property market if you know where to look. Activity in the property market may have slowed in recent months causing a dip in nationwide home prices, but there is one region of the country that continues to defy the market slump, and that is the capital city of London.

The latest property price index released by LSL Property Services and Acadametrics shows that the capital was the only region of England where residential property prices increased in December 2011, thanks to strong demand for property for sale in London.

The index reveals that the average price of a home in London appreciated by 0.6 per cent in December compared to the previous month and by 3 per cent against the corresponding month in 2010.

LSL Property Services commercial director David Brown said: "Prices in London have bucked the national trend, not falling in any of the last six months, and growing annually by three per cent."

Activity in the London property market has been strong thanks to an influx of foreign buyers and a rise in the number of landlords looking to take advantage of high demand for property to rent in London by adding to their buy-to-let portfolios.

Estate agents offering property for sale in Marylebone, Knightsbridge, Kensington & Chelsea, Mayfair, among other parts of prime Central London property, will agree that the property market in this part of city is particularly attractive due to a chronic housing shortage coupled with strong demand from wealthy homebuyers.

Such is the shortage of houses and flats for sale in Marylebone for instance, many would-be purchasers are prepared to rent in the short-term in order to bide their time until the right property becomes available to buy.

This is placing even greater pressure on a high level of demand for property to rent in Marylebone, driving rental values up in the process; an attractive proposition for buy-to-let property investors.

John Heron, managing director of Paragon Mortgages, commented: "Buy-to-let is making huge progress and we are seeing solid, steady levels of growth. 2012 will be another interesting year for the buy-to-let market, and we need to continue to build on the success of 2011."

Andrew Ellinas, director of leading estate agents Sandfords, which offers a wide selection of houses and flats to rent in Marylebone, says that the mood in central London is rather upbeat despite the sluggish nature of the market across most parts of the country.

He commented: "Everyone thinks the value of their house has gone down in the last few months, except in London, where things are very different. Property prices remain stable and vendors who seriously want to sell are doing so very quickly if the price is realistic."

The strength of the property market in Marylebone appears to be rippling out to highly desirable secondary destinations in London.

The property market in Little Venice in Maida Vale, located a short commutable distance from Marylebone, is a prime example of an area located just outside of central London, which is booming at the moment.

Anyone looking at either a property for sale in Little Venice or a property to rent in Little Venice will find that competition for the best homes is fierce, which is explains why property prices and rents are sky-high.

Furthermore, despite the uncertainty in the wider UK property market, prospects for the property market in primary and secondary parts of London continues to look positive offering good prospects for further capital and rental growth.

Director of research at Hometrack Richard Donnell said: "On a national basis house prices have not increased over the last 18 months - a theme carried over into January 2012 when prices were unchanged."

"London looks set to buck the national trend again in 2012 thanks to overseas buyers providing a boost to prices in London’s prime areas."

London property management services growing increasingly important

Many landlords take property management for granted. But with rental prices at an all-time high and demand for property to rent in London rising, more landlords need to think about offering a more professional management service in order to meet growing expectations from tenants.

Very few landlords, particularly those who also have full-time jobs, appreciate just how much work is involved with managing a property, not until they experience problems. Consequently, more landlords are now hiring London property management firms, especially if they have more than one property situated across various locations.

Adam Feather, managing director of Hampstead estate agents Robert Anthony, which offers a professional property management service, says that his firm has seen a noticeable rise in the volume of landlords turning to property companies in order to manage their buy-to-let units.

Mr Feather said: "Property management is a process that includes a lot of duties from checking tenants for credit stability, collecting rent, doing minor and major repairs. It may appear easy, but it can prove to be a serious pain and extremely time-consuming, especially if a landlord does not fully understand what is required."

Mr Feather urges anyone thinking of offering a property to rent in St Johns Wood, Hampstead, Primrose Hill or Swiss Cottage - areas in which his company operates in – to hire the services of a professional property management firm.

He added: "Landlords operating in these sought after areas in North West London should seriously consider their options because rents are not cheap and tenants expect to receive a first class service for their money".

Landlords are currently achieving weekly rental rates of £562 per week, on average, in St John's Wood, according to figures supplied by estate agents Colliers International.

London's stable and liquid housing market, supported in part by a strong private rental sector, makes it especially attractive to domestic and international property investors aiming to take advantage of high rental returns and potential future capital growth.

A new report by Colliers International states: "House prices in London have increased to pre-financial crisis levels, there has also been rapid growth in rental values across the capital."

Leading estate agents Sandfords, which offers a wide selection of houses and flats for sale in Marylebone as well as houses and flats to rent in Marylebone, along with homes in surrounding areas, report that demand for property for sale in London appears to be increasing.

"As we move into spring, we expect the market to strengthen as buyers return, attracted by the underlying value of properties in the world's capital city [London]. There's no pessimism here", said Andrew Ellinas of leading estate agents Sandfords.

Demand for homes in London is being driven in part by a rise in the volume of landlords adding to their buy-to-let portfolios in anticipation of higher rental values and yields.

Jones Lang LaSalle (JLL), a property consultancy, says typical UK rents will grow another five per cent on average in 2012, led by a seven per cent hike in London, mainly due to a lack of homes on the rental market.

JLL estimate that there will be around 150,000 more London households renting than before the financial crisis. By 2015 there could be more private tenants in London than people with mortgages.

Jon Neale, JLL's research director, said: "London's employment market remains intense and there's still strong population movement into the capital. But the stock of rented property has hardly increased over the past few years."

Central London estate agents see strong international demand

Despite a general slowdown in the UK property market, central London estate agents are still witnessing a high level of demand for properties in London, particularly in Prime Central London where there is a high level of activity among international homebuyers, pushing property prices higher in the process.

The latest figures supplied by Knight Frank show that the average price of Prime Central London residential property rose by 0.9% in January on the back of greater inquiries for property for sale in London. This latest increase pushed the three-month rate of growth to 2.7%, the highest rate since July 2011.

Annual growth now stands at 11.9%, with prices rising 42% since their post-Lehman low in March 2009.

Capital appreciation has also been driven in part by a hike in activity among property investors looking to take advantage of higher rental returns on the back of greater demand for property to rent in London.

Data supplied by estate agents Cluttons reveals that average rents increased by almost 9% between Q4 2010 to Q4 2011, reaching a level 10.3% above the market peak in Q1 2008.

'Foreign buyers, institutional investors, commercial property companies, developers and private buyers are all seeking to cash in on the high level of demand in the market. London has a stable and liquid housing market, making it especially attractive to foreign buyers who are caught up in sovereign debt issues and concerned with wealth preservation,' the Cluttons report said.

According to the report, rents in London regularly exceed £1,000 plus per week in central prime areas of London and since 2000 property values in London, in particular in the prime sector, have consistently outperformed the FTSE 100 over the long term.

Liam Bailey, Knight Frank's head of residential research, comments: "The strength of London's luxury sector, against a backdrop of economic difficulties both domestically and globally, has surprised many over the past year.

"Ironically economic and even political turmoil have provided the impetus for growth - with a sharp growth in investors looking for a safe-haven location for at least part of their wealth portfolio."

The research shows that the sector leading price growth at the current time is the £1 million to £2.5 million segment. Prices in this price range have risen 14.4% over the past 12 months.

Andrew Ellinas, director, Sandfords, said: "Here in central London, property prices remain stable and vendors who seriously want to sell are doing so very quickly if the price is realistic, but few property owners want to sell because central London property is one of those rare classes of wealth that is retaining its value in a world where inflation is creeping up and stock market yields are volatile."

Aside from viewing the London property market as a relatively safe haven from wider economic problems domestically and internationally, Naomi Heaton, chief executive of London Central Portfolio says many overseas nationals are also buying properties in London in order make it easier to send their children to British schools and universities.

"People feel very comfortable here [in London], it is a cosmopolitan society, it is one of the most visited destinations in the world, it is the centre [of the UK] geographically, financially and culturally", said Ms Heaton.