High Buyer Demand On The Back Of Low Mortgage Rates

Many property experts project that residential prices in the capital will rise in the short to medium term, on the back of low mortgage borrowing rates and a rise in the number of international buyers looking to acquire property in London, widely considered to be the ultimate safe haven market.

Mortgage borrowing rates have fallen sharply in recent week, with some two-year fixed rate deals starting from as low as 1.99 per cent, on the back of the Bank of England's Funding for Lending Scheme, which was introduced last year.

There are growing signs that government efforts to boost mortgage lending are trickling down to people with smaller deposits, reflected by the fact that there has been a sharp rise in the number of first time buyers.

November's mortgage lending data from the Council of Mortgage Lenders (CML) shows that the volume of first-time buyers increased by 24 per cent year-on-year, with a total of 21,700 loans advanced to first-time buyers, worth £2.7 billion, in November, marking one of the highest monthly totals seen in the past three years.

For the second consecutive month, first-time buyer loans accounted for 41 per cent of all home purchase loans, compared with the longer-term average of 38 per cent.

"Encouraging activity in the first-time buyer sector in November contributed to an uplift in house purchase lending, suggesting the underlying trend for year-on-year increases should continue," said Paul Smee, director-general a CML.

Attractively low mortgage borrowing rates has led to a rise in the number of homebuyers searching for a house or apartment for sale in Little Venice, St John's Wood, Primrose Hill, Marylebone, among a host of other desirable locations in the English capital.

"All these areas have seen surging prices over the last year," said Andrew Ellinas of leading estate agents Sandfords.

He added: "The best houses and apartments in these areas now represent a safe and secure place to store funds as well as a base in some of the loveliest areas in the most vibrant, cultured and cosmopolitan city on earth."

Whether talking to Mayfair estate agents or Marylebone estate agents, or any agent in a sought-after part of London for that matter, they will all agree that London is proving a wealth magnet thanks to its safe haven status.
                              

London's political and relative economic stability has helped to attract a high number of overseas property investors in recent years, as they seek to preserve wealth in light of political, economic and financial upheaval in their home nations, helping to push property prices higher.

Yet, despite the surge in London property values, the weak pound, ironically, has actually made acquiring property in London relatively cheaper for some foreign buyers, particularly those from Asia.

Shirley Humphrey of Harrods Estates said: "The prime central London residential market is as popular as ever with international investors. While interest from Russian and Middle Eastern investors remains strong, increasingly, buyers from Hong Kong and Singapore are making a significant impact."

Wealthy overseas buyers generally look to buy property in some of London's most exclusive areas, which explains why so many look at property for sale in Fitzrovia, Chelsea, Mayfair, Hyde Park, among other desirable districts.

International purchasers, especially those from Asia, are particularly interested in acquiring new build homes in the capital.

Trish Henderson, Sales and Marketing Director, of Taylor Wimpey Central London, said: "Investors from the Far East, in particular Singapore and Hong Kong, have been key drivers in the prime London new build residential market. These buyers are looking for solid investment properties, but more and more, properties in areas that offer a great range of lifestyle and education options for their families.

As we start the new year confidence to the residential property market appears to be improving, helped in part by low mortgage rates. Many housing experts predict that transaction levels will continue to increase in many parts of the country and this in turn could lead to significant capital growth.

Greater Rental Demand for Properties in Fitzrovia

With demand for rental properties in central London continuing to rise, the cost of property to rent in Fitzrovia has increased to an all-time high.

Soaring demand and increasing rental values has alerted a number of astute property investors, with many actively looking to add to their buy-to-let portfolios.

The latest market data from the Association of Residential Lettings Agents (ARLA) has revealed an upward trend in landlord investment over the past 12 months. 

 

The average number of buy-to-let properties owned by landlords peaked at eight in the final quarter of 2012, up from seven at the beginning of the year. The apparent rise in confidence in the market also prompted increased landlord activity, with 29 per cent stating they have bought a property in the past year compared to 25 per cent at the start of 2012.

The increase in landlord confidence is also reflected in the rise in the value of buy-to-let mortgages, with an eight per cent rise in the final quarter of 2012 totalling £4.2 billion according to Council of Mortgage Lenders.

Ian Potter, Managing Director of ARLA, said: "The latest data from ARLA suggests that landlords are carefully but concertedly increasing their portfolios; activity is returning to the buy-to-let market. Whilst many investors naturally remain cautious, the climb to an average of eight properties per landlord shows that 2012 was a strong year for the PRS."

With more investors acquiring residential properties in prime central London, which includes Fitzrovia, housing stock levels in the heart of the capital have declined by around 25 per cent at the start of 2013 compared to the same period last year, according to property consultants Cluttons.

 

The company says that it is witnessing extraordinary levels of competition between domestic and international buyers for the limited property for sale, on the back of record high levels of demand for properties to rent in central London, including houses and flats to rent in Fitzrovia.

Charlie Noel-Buxton, partner for residential sales at Cluttons, said: "House hunters in prime central London, starved of options, are going to great lengths to secure a property when it comes onto the market, particularly those on the most desirable roads."

Research shows that there is not just a shortage of properties for sale in Fitzrovia, among other sought-after areas in central London, but greater rental demand means that there are also now fewer homes to let, forcing more tenants to consider flatsharing in order to secure accommodation in the capital.

In the past year, the number of bedrooms available for flatsharers to rent has fallen by over two fifths (44 per cent), according to a study conducted by flatsharing website easyroommate.co.uk. Over the same period demand has remained steady and this has put greater strain on an already stretched supply of rooms. This supply and demand imbalance has caused rents to rise 3.6% (£415 to £430 per month) since January 2012.

Yet the firm estimate that the cost of flatsharing in the UK will increase by a further 4.3 per cent by the end of 2013, on the back of falling numbers of rooms available to rent and consistent demand from rentersin the flatshare market.

Jonathan Moore, Director at easyroommate.co.uk, said:"The last few years have been tough for renters and 2013 will be no different. Falling numbers of rooms available to rent is putting strain on supply and leading to higher and higher rents. Flatsharing remains a much more cost-effective option for renters but anyone hoping to rent a room this year needs to be aware of the rising costs and factor this into their budgeting."

The general shortage of flats and houses to rent in Fitzrovia in relation to increasing demand is likely to push rental values in the area even higher over the next few months, creating fresh investment opportunities for landlords in the process.

"The success of the prime central London property market over the last five years is creating a wave of price rises," said Andrew Ellinas of leading letting agents Sandfords.

He added: "Property economists are also bullish on the private rented sector, pointing to the latest census figures that show the rising generation is moving to city centres to live. They cannot afford to buy and are increasingly deciding to rent long-term."

The booming London property investment market is expected to attract even more investors seeking solid rental returns and good prospects for capital growth.

Little Venice Continues to attract thousands of Tenants

 Mortgage borrowing rates have declined substantially in the past few weeks, with some two-year fixed rate deals available at just 1.99%, on the back of the Bank of England's Funding for Lending Scheme, which allows finance giants to borrow up to £60 billion at a low interest rate on the condition that it is loaned to homebuyers and businesses.

But despite cheaper mortgage borrowing rates, many first time buyers are still unable to raise the large deposits required to buy property, particularly in London, where property prices are the most expensive in the UK.

Many would-be homebuyers have therefore been forced to focus on renting property in the capital, with highly desirable areas naturally attracting the most interest. Little Venice in Maida Vale, west London, very much falls into this category.

Little Venice, located in south Maida Vale, is one of London's prime residential areas and offers residents and visitors plenty to see and do. Aside from the local canal, it is renowned for its shops and restaurants, as well as the Canal Cafe Theatre, the Puppet Theatre Barge, the Waterside Café and the Warwick Castle pub. A regular waterbus service operates from Little Venice eastwards around Regent's Park, calling at London Zoo and on towards Camden Town.

The area's attractions and scenic setting has helped to fuel demand among those seeking a flat or house to rent in Little Venice, pushing rents higher in the process. 

But high rents have persuaded many property owners to remove their flats and houses in Little Venice from the sales market and let them out instead. This is actually now placing downward pressure on rental values in the area; welcome news for tenants looking for a house or flat to rent in Little Venice.

"Unfortunately, the upsurge in properties coming onto the rentals market has meant that rents are now under pressure," said Julia Garber of Maida Vale estate agents Sandfords. "Tenants are demanding more realistic rent levels."

Little Venice is not the only area to see rents come under pressure, despite attracting high demand from renters.

Rents in December fell for the second month in a row as landlords, according to the latest Buy-to-Let Index from LSL Property Services.

A survey conducted by LSL, which owns letting chains Your Move and Reeds Rains, found that the average rent in England and Wales fell by 0.9 per cent in December to £734 per month, based on an analysis of 18,000 properties.

Although falls were led by decreases of 1.7 per cent in eastern England and the North East, they were closely followed by London where rents fell by 1.5 per cent,

"Tenants were in a stronger bargaining position as landlords reduced rents to fill empty properties in the slower winter months," said David Newnes, director of LSL Property Services.

But as the New Year progresses the underlying weakness in the mortgage market will mean competition will heat up once more, helping to eventually push rent higher once more.

He added: "While rates are coming down for those with large deposits, extremely low saving rates are hitting those still trying to pull together a deposit – a problem accentuated by the record low base rate."

With rental values widely expected to rise again, there are emerging signs that more landlords are seeking to take advantage of favorable market conditions by adding to their buy-to-let portfolios.

The most recent figures from the Association of Residential Letting Agents (ARLA) show that rental properties continue to be an attractive investment for landlords.

ARLA research found that the average number of buy-to-let properties owned by landlords peaked at eight in the final quarter of 2012, up from seven at the beginning of the year.

Ian Potter, managing director of ARLA, said: "The latest data from ARLA suggests that landlords are carefully but concertedly increasing their portfolios; activity is returning to the buy-to-let market."

Bob Pannell, chief economist at the Council of Mortgage Lending, reports that many property professionals are feeling more positive about the UK housing market and wider economy than a year ago, despite economic headwinds and downside risks.

"House purchase activity was robust in the fourth quarter, on the back of better mortgage availability and pricing, and we expect this to continue over the coming months," he said.

As demand from homebuyers return and the Funding for Lending Scheme gains momentum, it presents investors with a real opportunity to secure a long-term, low-risk property investment. But for many would-be homebuyers, the rental market remains the only option for now.

More Investors See Property As A Pension

With a growing number of people becoming disillusioned with pensions and bank saving rates at an all-time low, more investors understandably now see their properties as a means of funding future retirement, research shows.

According to a survey conducted by BDRC Continental, 61 per cent of landlords plan to live off the rental income from their investment properties, 20 per cent will sell some of the properties in their portfolio, whilst five per cent intend to dispose of all of the properties in their portfolio to fund retirement.

Mark Long, director at BDRC Continental, said: "Landlords consistently tell us that they see their property portfolio as forming a critical part of their pension provision for the future. On average, landlords intend to remain active in the rental sector for another 15 years or so, and see a combination of capital gains and rental income as underpinning their pension strategy."

With research showing tenant demand increased by seven per cent in the third quarter of this year and average yields increasing 0.5 per cent to 6.7 per cent, it is not surprising that many private landlords view property to be a safer bet than other investments such as pensions.

Adam Feather, managing director of Robert Anthony estate agents, says that his company has seen a sharp increase in the number of people looking to invest in properties in the capital, particularly from people overseas, with houses and flats for sale in Little Venice, Regents Park, Primrose Hill, Marylebone, Hampstead and Baker Street proving particularly popular.

"Property prices in central London and the areas surrounding it are expected to edge up faster in the next few months as the supply and demand imbalance becomes even more pronounced," Feather said. 

The problem facing many tenants is that the supply of houses and flats to rent in Primrose Hill, Regents Park, Marylebone, Baker Street, among a host of other highly desirable areas are in short supply, which in turn is pushing rents higher as a consequence; an attractive proposition for existing landlords and investors looking to acquire properties in those areas.

Andrew Ellinas, director at leading estate agents Sandfords, commented: "We expect an influx of both investors and immigrants including French bankers and entrepreneurs coming over here for the more business-friendly environment. This invasion on two fronts will boost both ends of the market, with lettable flats at the lower end being snapped up by investors and large family homes being in demand from business people looking for somewhere to live." 

Any investor looking to take advantage of high demand for houses and apartments to rent in Marylebone, Primrose Hill, St Johns Wood, Baker Street, among other highly desirable districts, by acquiring property, may wish to consider Neil Yong's ‘10 minute rule'.

Young, founder of property investment firm Young Group, has personally accumulated a private property portfolio collectively worth around £10 million. Geographically, all of Young's investment properties are located in London, where prospects for capital growth and high rental returns are generally good. He says he would not consider buying outside of London or even abroad as it does not fit in with his strategy.

Young has adopted what he refers to as his "10 minute rule", which means that he only buys residential properties which are located within close proximity to good transport links and amenities.

"I'm primarily only interested in properties that are situated within 10 minutes walking distance to good transport links, particularly a tube station, food stores, bars and restaurants, as these facilities are generally in high demand from tenants."

Wherever you choose to invest in property, always ensure that you conduct all necessary due diligence prior to investing.

Rents In London Expected To Continue Rising

It is that time of year again when estate agents, and other property professionals, predict what the property market in London will look like in 2013, and most experts, whether Mayfair estate agents or Primrose Hill estate agents,  agree that property values and rents are likely to rise further next year.

With the UK economy now technically out of recession and growing signs that mortgage lending conditions are improving, confidence in London’s property market is strengthening, with prices generally expected to increase in 2013. This follows on from a rather successful 2012, in which values rose by an average of 5.2% in the year to September, according to the latest data from the Office for National Statistics.

Just over a third of people surveyed by the Halifax recently predicted that the average UK home price will rise over the next year, led by capital gains in central London. 

Trevor Abrahamson, head of Glentree Estates, said: "We are building five per cent of the properties we need in the Capital and new development is as constrained as ever before by the labyrinthine planning processes and acute shortage of funding for property development. Therefore these factors conspire to reduce the supply whilst the demand remains steady and for this reason I don’t believe prices will ease."

Aside from higher property prices, market experts are also projecting that rents in central London will increase further next year, on the back of a shortage of houses and apartments to rent in central London.

Existing market conditions mean that rental price growth in the capital will almost certainly continue to outstrip the national average next year, according to Virginia Ewart-James, head of residential lettings at EA Shaw, a central London specialist based in Covent Garden, who estimates that rents will continue to increase at an annual rate of five per cent during 2013.

Ewart-James commented: "There is still good demand for rental properties which will continue to strengthen as London grows further as a hub and a popular place to live and work. London is still seen to have the best education in the world and remains an attractive option for studying. Students in particularly, are bringing in good budgets; often paying six months in advance, and proving to be valuable and lucrative tenants within residential lettings."

Demand is generally greatest for apartments and houses to rent in central London which are priced under £1,000 according to Marsh & Parsons.
 

"The more buoyant sub £1,000 a week market has seen a strong performance," said Peter Rollings, CEO of Marsh & Parsons. "Based on current trends, Marsh & Parsons expect rents in this segment of the market to rise by a further eight to ten per cent in 2013."

The hike in rental values in central London has convinced many homeowners thinking of selling their property to let their home instead, according to leading estate agents Sandfords.

Julia Garber of Sandfords said: "High rents have persuaded many property owners to remove their flats and houses from the sales market and let them out instead.

"Landlords can still expect excellent returns on their investment, but our advice is to be flexible on the rent to prevent extended voids."

Until there is a major rise in house building activity, it is highly unlikely that the supply of homes in the capital will never meet growing demand for properties which could result in further rental price rises beyond 2013.

International demand for homes in prime central London continue to rise

The Eurozone crisis has continued to boost international demand for houses and flats to rent in Fitzrovia, Mayfair, Hyde Park, among a host of other prime central London locations.

 

The fact that London is generally viewed as a 'safe haven' amid the economic turmoil in the Eurozone means that more people are moving to the capital in order to escape the calamity and preserve their wealth.

But while many foreigners may prefer to buy property in London, the general shortage of homes on the sales market is forcing them to rent property instead.

"We have reached the point of no return for the housing market," said Gemma Duggan of the National Housing Federation. "Successive governments have failed to tackle the under-supply of housing and time is now running out."

 

A quick online search for a house for sale in Little Venice, for example, a west London district a short distance from Marylebone, which is generally popular with international homebuyers, shows that there are very few houses currently on the market in the area. Consequently, many people looking to buy a home in the area will have to opt for rented accommodation until more houses become available.

The shortage of properties for sale also reflects a sharp rise in the volume of people snapping up homes in prime central London.

According to estate agency WA Ellis, there was a 36 per cent rise in the number of property transactions in prime central London from September to October.

Tim des Forges, partner in residential sales at WA Ellis, said: "The first week of half term was unprecedented, and is perhaps now bringing in buyers who avoided London during the summer's events. This is illustrated by the total numbers of sales in prime central London in October, which is up by 35.81 per cent on September."

The company's letting division has also been rather busy, particular when it comes to letting homes in the £1,000-£3,000 per week bracket and more tenants are staying for longer; the average tenancy now stands at around three years, according to WA Ellis.

"These tenants are seeking two or three bedroom properties in Prime Central London, and any property that presents well is letting quickly," said WA Ellis' Lucy Morton.

Not only are more people now required to live in rented accommodation, but the resulting shortage of homes for sale means that property prices in prime central London are rising.

The latest Knight Frank Prime Central London Index shows that the average price of a home in the region appreciated by 0.8 per cent in October compared to the previous month, pushing annual growth to 10.1 per cent. Prices are now 52 per cent higher than in March 2009.

"Our analysis of market activity confirms that average prices have climbed 10.1 per cent over the past year, with flats [11.1 per cent] outperforming houses [8.4 per cent] in terms of growth, said Liam bailey of Knight Frank.

Among the areas performing particularly well in terms of price appreciation is Marylebone, which has seen a growth over the past year of 14.5 per cent – the highest annual rise of all areas covered by the index.

Property prices in Marylebone are rising on the back of a general shortage of properties for sale in the area in relation to high demand. But with many people wanting to live in the area, more people are now prepared to consider looking at a house or flat to rent in Marylebone.

 

Andrew Ellinas of leading estate agency Sandfords said: "Marylebone, with its wealth of elegant properties and desirable High Street, has been attracting affluent buyers for a number of years. Demand for properties priced between £1.5 and £4million is intense."

With demand for housing in prime central London expected to continue to rise, very few people would bet against further capital growth and rental price rises moving forward over the next few years.

Rents could soar on the back of London housing shortage

Anyone searching for a flat to rent in St Johns Wood will find that there are not that many homes to choose from. In fact, anyone looking for a home to rent anywhere in and around prime central London will almost certainly discover a dearth of properties to let due to the growing housing shortage in the capital.

Log-on to any major property portal and search for ‘houses to rent in Fitzrovia’ or ‘apartments to rent in Mayfair’ and you will see that there is a restricted selection of properties to choose from.

The growing demand-supply demand imbalance in prime central London may be welcome news for landlords, but it is creating problems for some tenants as rents continue to soar.

The cost of renting a home in England and Wales increased by 1.1 per cent in September to reach a new record high of £741, on average, per month, according to LSL Property Services. This was 1.1 per cent higher than August and 3.2 per cent up on the same month a year earlier.

“Rents have risen consecutively for half a year as tenant demand strengthens on the back of a historically subdued mortgage market,” said David Newnes, of LSL.

He added: “Every pound monthly rents go up by is another pound that renters cannot save for a deposit for their first home. This is lengthening their stay in rented accommodation, and increasing competition in the private rented sector.”

With housing supply unlikely to improve anytime soon, many experts project that rental prices across many parts of the UK will continue to soar, particularly in prime central London.

The average rent in London is set to rise to £404 per week by 2018, according to a study by the National Housing Federation.

David Orr, Chief executive of the National Housing Federation, said: “Only by addressing the chronic undersupply of new homes can we stem the financial pressure on families.”

Many would-be vendors have decided not to sell their homes and take advantage of the buoyant rental market by letting them out instead, according to Julia Garber of Sandfords’ letting division, which specialises in offering houses and apartments to rent in Fitzrovia, St Johns Wood, Marlebone and Primrose Hill.

Garber said: “High rents have rents have persuaded many property owners to remove their flats and houses from the sales market and let them out instead.”

Increasing rental values is also expected to attract more buy-to-let investors seeking to beat historically low bank saving rates.

With savers receiving dismal returns from banks and building societies in stark contrast to soaring rental prices and higher yields, more people, and not just existing homeowners, are unsurprisingly turning to buy-to-let property as a means of supplementing their income.

Adam Feather, director, Robert Anthony estate agents, commented: “Existing property market conditions in London are perfect for landlords. With many would-be property buyers struggling to gain a foot on the housing ladder, rental demand will inevitably rise further, pushing rents higher in the process. That’s why buy-to-let properties generally offer stable, low risk investment returns.”