Landlords with property to rent in London are set to benefit financially as rents rise.
According to data from LSL Property Services, rents rose to a record high in May, having increased by 0.5 per cent to an average of £696.
London landlords are particularly well-placed to benefit as they could well see total annual returns of nearly five times the national average as demand for London property to rent steadily increases.
John Heron, managing director at buy to let lending specialist Paragon Mortgages, commented: “The rising rent costs reported give an indication of the continued lack of properties in the buy to let sector due to the constrained finances of professional landlords.
“There are a number of products available for smaller scale landlords, with only one or two properties, but for the professional landlord with a large portfolio there is limited finance available,” he noted.
Mr Heron called for more UK mortgage lending options to be made available to professional landlords, as this will be needed to drive growth in the sector.
London Property to Rent
Landlords with property to rent in London or other areas of the UK could benefit if people give up the “obsession with ownership”, Firstrung has argued.
Paul Holmes, chief executive of the organisation, claimed: “The thought is, ‘You must buy as quickly as possible. Rent is dead money’. Rent is not dead money if it is costing you less than a mortgage and a house is depreciating in value.”
He called for a “rethink and a little bit of anti-zeitgeist feeling about how you must own a house” because current thinking is “nonsense”.Mr Holmes added that there are “great attributes” to renting a home and not being tied down.
His remarks come after research from Halifax found almost half of young people believe the majority of individuals will be renting within the next generation, becoming more like Europe where renting is seen as the norm.
London Property to Rent
The RLA reports that demand for residential rental properties remains high in the UK, but new statistics suggest that the number of houses and flats available to tenants is decreasing. According to figures compiled by Key Note, more than nine out of 10 (95%) of Britons under 19 years of age intended to rent properties for the foreseeable future, yet separate numbers also show that letting agents have seen a 20% drop in the number of properties available for rent. Steve Lees, representing Key Note, added that fewer new properties are making their way into the buy-to-let market and that the number of homes for rent is showing signs of contraction. As such, tenants are often competing with each other, in order to claim properties in convenient or desirable locations.
Previous studies have shown that many students in college towns are often looking for higher quality accommodation than generations before them and are able to pay the steeper rents. As demand remains strong and while the supply of properties stagnates and even declines in some parts of the country, rents are rising.
Lees noted that for the supply of rental properties to increase, David Cameron’s coalition government would have to do more than simply enact capital gains tax (CGT) changes that are more acceptable to landlords than the previous proposals. The most important step would be to encourage banks to increase buy-to-let mortgaging. Yet even if this were to take place in the near future and more landlords invested in the rental sector, Lees predicts that the supply in rental properties would still increase at an incremental pace.
Prime Minister David Cameron’s Conservative-Liberal Democrat coalition decided to avoid the introduction of more regulation and red tape in the buy-to-let sector. Grant Shapps, the new housing minister, told the House of Commons that there was no compelling need to regulate private residential landlords any further, as a clear majority of the 3 million English residents who live in rental accommodation seem satisfied with their lodging. Shapps pointed out that the government’s role is to ensure that there is a healthy balance between the rights and obligations of residential landlords. At this point, the minister sees no reason to tinker with this balance.
The previous Labour government drafted plans to introduce a new set of red tape and regulations to govern residential landlords. These included requiring landlords to join a national register program, mandating everyone in the buy-to-let sector to draft written agreements with tenants and the introduction of a new set of rules that would have governed letting agents. Shapps spoke directly to landlords, promising not to increase bureaucratic red tape, while also calling on local councils to make effective use of the authority that they already have to deal with a small minority of landlords who provide substandard service.
While the decision not to further regulate the buy-to-let sector may serve as a relief to landlords, some are still concerned that there is too little oversight when it comes to letting agents. The alternative, which was not chosen by the government, would be to launch a set of national standards and rules to ensure the professionalism and ethical conduct of all letting agents.
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