2015 – London’s renting golden age

Residential rent in London is enjoying robust growth at the moment, according to recent statistics which show that rental values are up 4 per cent. The London lettings market is equally healthy at present, with the window between viewings and offers often lasting mere hours.

The popularity of long-term tenancies is at least partly due, no doubt, to the crippling stamp duty (12 per cent at the top end) which has made home ownership cost-prohibitive for a large portion of Londoners. In Prime Central, many such tenants are overseas professionals who believe that renting is a cost-effective alternative to buying. In East London, meanwhile, renting is seen by young renters as more of a positive lifestyle choice.

As we’ve previously reported, drastic changes in the post-baby boomer property world mean that home ownership is not as universal a goal for millennials as it was for previous generations — especially when they can afford to rent a much higher quality property (and subsequently enjoy a higher standard of living) than they could ever hope to buy.

Rather than scrimping and saving for a deposit on a bedsit in Zone 4, renting in a trendy area with friends or flatmates is the more desirable option, whether it be a long-term tenancy or a short-term contract which offers the freedom to move to whichever borough is up and coming.

While this is all great news for landlords, it also means that there’s some fierce competition out there, making it more important than ever to launch a property to market in the right way. Click here to find out how Rentify can help you let and manage your property.

All this encouraging news is tempered, of course, by concerns that Chinese investors (who gobbled up millions of pounds’ worth of London property) are about to jettison their portfolios and make off with the cash, just in time for a slump. “Once the Dragon realises that London property has already seen its growth spike, interest will move on to some other international destination leaving thousands of square feet of expensive London property dark, unloved and depreciating,” agent Henry Pryor told the Daily Mail.

However, the Bank of England’s Alex Brazier believes that major losses can be avoided if property investors take the time to study the market more closely, and develop a better understanding of the highs and lows — all of which, he claims, are part of a perfectly predictable cycle. In order to prevent the industry from repeating past mistakes, Brazier is in the process of compiling an index of banks, investors and customers which will enable shrewder monitoring of prices and lending, which in turn will help to identify and mitigate risks.

Brazier believes it is important to be proactive while the market is up. “We have to start now,” he says. “So in a matter of months, the Bank of England will start reporting market-wide indicators of valuations and gearing based on cashflows capitalised at cycle-neutral rates. It will help you to measure the risks. And risk that gets measured can get managed.”

George Spencer is CEO at Rentify.