Landlords have never had it so good

Landlord Expert
By Landlord Expert June 1, 2011 08:22

Landlords have seldom had it so good. A lack of stock, a dearth of mortgages and instability in the market has seen some home owners struggling to contain their glee.

Matthew Martin, of Your Move, says that despite 14 years in the business he has never known anything like it, with rental incomes reaching new heights.

The main surge has been in Greater London and the Home Counties, with a ripple effect moving through the country.

‘Greater London has seen rent rises of around 20 per cent in the past year, so tenants are looking further afield,’ says Martin. ‘A large proportion head to Surrey or cheaper areas to the north of the city, such as Hertfordshire. Any location that offers good transport links to London is seeing increases.’

His experiences are backed up in a survey by LSL Property Services, which claims rents in April showed record highs and are 4.4 per cent up from a year ago.

Agents countrywide are reporting that good properties are being snapped up within hours of going on the market. Gazumping on desirable properties is rife.

In the South-east, where demand is strongest, a one-bedroom apartment in a town such as Surbiton can fetch around £900 per month, with two-beds going for £1,200 and three-bedroom homes for around £1,600 — £200 to £300 per month more than a year ago.

So what’s pushing rents to these levels? Lack of finance is the main factor. This week, it was reported that the number of mortgages offered last month has slumped to the lowest level since records began.

Prospective buyers can’t get mortgages unless they have a sizeable deposit, which for many first-time buyers is impossible. They are, therefore, being forced to move into rented accommodation. Equally, many families who have to move, either for work or more space, can’t find a suitable new home and end up renting.

The squeeze is also coming from an influx of international workers, taking corporate lets, and local authorities which needs to secure social housing.

The rise in the number of students has put a strain on university towns, such as Liverpool and Manchester, where some developers are switching to building student rentals instead of standard flats.

One-bedroom flats in Empress Mill, Manchester, for example, are  being sold through Property Secrets from £65,000 with estimated incomes of £500 per month, while Property Frontiers is selling rooms with communal facilities in Hatton Garden, Liverpool, from £48,000 with guaranteed first-year returns of 10 per cent.

Ray Withers, of Property Frontiers says: ‘We’ve had interest from first-time buyers who can’t afford their own home, but can get a mortgage for a low-price student let and see it as a step on the ladder.’

Estate agent Savills predicts that by 2016 one in five households will be in rented accommodation.

‘Growing demand and low stock levels are pushing rents up and rental growth is significantly greater than house price growth,’ says Lucian Cook, Savills’ head of research. ‘We forecast this will continue.’

Those who own a rental property are understandably happy.  London resident Jon Tompson bought a two-bedroom buy-to-let in Liverpool three years ago for £155,000.

The monthly rent has increased from £800 to £900 in the past year, however, his mortgage has reduced thanks to low interest rates and the ability to pay some of it off early, so his profits have risen from £150 per month to £500.

‘Agents have said there’s interest in buying in my building because it’s in a popular location,’ says Mr Tompson. Rob Hill, of letting agent Greater London Properties, is benefiting from both aspects of the market.

His firm is seeing a surge in demand, but as a landlord he has also seen the yield on his three-bedroom flat in Clapham grow since he first let it in 2007, from 8.8 per cent to 9.7 per cent.

‘Rents in some areas of London have increased by 20 per cent,’ he says, ‘but people still want to live there.’

Great for landlords, less so for cash-strapped tenants and home-buyers.

Your Move: your-move.co.uk; Greater London Properties: 020 7734 4062, greaterlondonproperties.co.uk; Property Secrets: 0115 985 3963, propertysecrets.net; Property Frontiers: 01865 202 700, propertyfrontiers.com.

Landlord Expert
By Landlord Expert June 1, 2011 08:22

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