Rise in rental demand brings boom for landlords
By Sharlene Goff
Financial Times
Published: February 1 2008 17:31 | Last updated: February 1 2008 17:31
Estate agents are seeing booming demand for rental property as first-time
buyers and foreign workers defer buying homes amid continued uncertainty
over prices.
Agents around London and the south-east in particular are seeing up to 25
per cent more activity in their lettings businesses compared with a year
ago. Many have waiting lists of tenants and are finding that new lets take
just a few days to fill.
Much of the demand is coming from young professionals and City workers who
are not prepared to buy into a weak housing market.
Lucinda Richardson, lettings manager at the Westbourne Grove branch of
Winkworth, says last month was the best January ever for lettings.
³Volumes
of business are about 20 per cent up on this time last year,² she said.
³There is huge demand for good cor****ate one and two-bedroom properties
they are going incredibly quickly.²
Lettings agents at the Surrey Quays branch of Kinleigh Folkard & Hayward,
which covers the Canary Wharf area, also re****ted a ³fantastic month².
³Weıre having a huge boom,² said Glynn Judd, head of lettings.
Hamptons International said its rental divisions had been very busy. Mark
Anderson, managing director, said strong demand was coming from employees
who had been seconded to London by their companies and were wary about
buying in the current climate. ³Those coming for two to five years are not
buying,² he said.
He added that a number of homeowners who sold up at the tail-end of last
year when prices were still robust, were planning to rent until prices
started to come down.
Landlords are also managing to secure significant rent increases.
Richardson
at Winkworth said tenants renewing their agreement were typically paying
5-10 per cent more per year, while new occupants were having to pay as
much
as 20 per cent more than they would have done a year ago.
Judd added, however, that tenants were becoming increasingly aware that
their landlords might put up prices and were trying to secure longer-term
lets of 18 months or two years.
A number of small landlords have sold properties in recent months because
of
higher borrowing costs, but for the less heavily geared, the outlook is
sunnier.
Rents rose at their fastest rate on record last year, as demand started to
pick up. Agents believe price growth may start to slow this year but
yields
rents as a pro****tion of a propertyıs cost are still expected to look
more attractive than they have in recent years.
Liam Bailey at Knight Frank expects rents to rise 4-5 per cent in London
this year after strong growth last year. Rents rose 15 per cent in central
London in 2007, But continued price growth meant gross yields were
squeezed
from 4.4 at the end of 2006 to 3.86 at the end of 2007. Bailey said they
could move back up to 4-4.5 per cent this year. Paragon Mortgages is more
bullish. The group, which this week gained approval for a £287m rights
issue, said gross national yields rose to 6.2 per cent in December, and
rental incomes increased 2.5 per cent last month alone.
Improving yields, combined with expected falls in interest rates this
year,
means a double boost to profit margins. ³The savvy and longer-term
landlords
will absolutely see an op****tunity [to buy],² said Anderson. ³They can get
a
better return if they buy well.²
Auction houses are re****ting a surge in repossessed property, and it is
the
buy-to-let investors who are waiting to snap up a good deal. Lenders have
tightened criteria, however, so investors may need a cash deposit of at
least 10-15 per cent to secure a loan at a competitive rate.
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