What’s new in the London letting market?

With all the doom and gloom in the press about the poor performance of the property market as a whole, landlords may be forgiven for harbouring concerns. However, while it is easy to get caught up in a spiral of negativity, the outlook is actually quite positive – particularly if you look ahead to the medium term

The higher end of the market has undoubtedly been affected by the uncertainty caused by the Brexit vote. As a result, there are fewer corporate tenantsand prices have softened. However, London continues to retain its status as one of the most attractivecities in the world, and despite the political ambiguity surrounding Brexit, we at Foxtons have only seen a marginal decrease of 2.2% in the number of tenants from Western Europe in Q2 this year compared to Q1.

It’s true that, as a result of this, landlords are faced with a tough choice; to reflect the current market conditions and perhaps hold off on a yearly rent rise, or to forge ahead with an increase and risk void. But it is important to note that prices now are still higher than they were five years ago.

The London letting market has benefited from a steady increase in prices for the past five to ten years, allowing landlords to maintain their yields. So even with the recent tax changes and potential new regulations on the horizon, there is still a profit to be made and landlords are unlikely to make a loss in the current climate.

Another aspect worth addressing is the development of the Built to Rent sector. Fears have been expressed that the emergence of this new sector will negatively impact private landlords. But concerns about oversupply and a subsequent reduction in prices are exaggerated. The delivery of these units is currently staggered in a drip supply, which will lessen the impact. Some tenants are also unfamiliar with the sector, with many preferring to opt for the more traditional approach of renting a privately-owned home.

Without doubt, the Built to Rent sector offers certain benefits to tenants, which include high quality apartments and service, bills included in the rent and the opportunity to enjoy community living with an abundance of communal spaces. This, however, comes at a premium, which again opens up opportunities for private landlords.

With that, there is a clear increase in demand for high quality apartments that the new sector reflects. This highlights the importance of taking good care of your rental home. So if you haven’t made any considerable improvements in the last five to seven years, now might be the time to address this.

Indeed, making sensible decisions that reflect the current state of the market is perhaps what is required for a positive outcome in the short-term. Looking to the future, propertyremains a solid and strong investment choice and with good levels of return and long-term capital growth, which is unlikely to change any time soon. 

Ed Phillips is the lettings managing director at Foxtons. 

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