London Property: the outlook for rents in the buy-to-let sector

By: Jay Stevens
Submitted: 2008-08-11 13:52:10
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

With London property prices crashing and house and flat repossessions increasing, this article examines the outlook for London rental values. Will London property fare better than the rest of the UK?   Will rents rise as house prices fall? 

The UK economy is in for a rough ride. House prices have dropped off a cliff and many buy-to-let investors have already seen the capital value of their property investments fall dramatically. The big question is: should they sell quickly before prices drop further, or should they hang on and wait for an upturn?

Of course, with mortgage rates remaining stubbornly high, many landlords may not be in a position to afford to ride through the storm. However, assuming imminent repossession is not a danger, a rational look at the indicators suggest that it is worth holding out for the next 3 or 4 years - as that is how long most analysts expect it to take for house prices to start to recover. 

Firstly, tenant demand for both flats and houses across the capital is likely to remain strong. London is in many ways a separate economy to the rest of the UK.   It is not so much a UK city as an international city and this does not look set to change. London has always attracted workers from other Commonwealth countries, notably Australia, New Zealand and South Africa but many reports now classify London as the fifth largest French city in terms of population. Although some East Europeans workers may return home as jobs become harder to find, anecdotal evidence suggest that many have settled here and intend to stay. And whatever the state of the economy, people still need somewhere to live.

With house prices falling and mortgages in short supply, many people are choosing to rent rather than buy. Letting agents report a surge of demand which has already been pushing up rents in some areas.

Secondly, the supply of rental property is likely to slow.   The major house-builders have mothballed developments and cut back sharply on new projects. Don’t expect to see any new luxury apartment developments for the foreseeable future. To this must be added those buy-to-let landlords who decide to bale out and sell up as the going gets tough and the fact that first time buy-to-let investors are an almost extinct species. The net effect: fewer properties available to rent.

And don’t forget the Olympic effect. The surge of new transport projects and construction associated with the Olympics is likely to give London’s flagging economy a boost in the run-up to 2012. As the value of the pound falls, London becomes more attractive to international visitors. And the international publicity surrounding the London Olympics can only keep London in the forefront of people’s minds as an international destination.  

Finally, history shows that house prices and rents are usually inversely proportional. As one goes down, the other comes up.

Put all these factors together and the outlook for London landlords doesn’t look so bleak. Tenants may face a few years of paying higher rents for London property. And sooner or later, the rise in rent prices and the fall in house prices will make buying a home, rather than renting, the more attractive option. At that point, the whole cycle will start again…

Christian Duggan is a solicitor (non-practising) and founder of www.rentfair.com, the popular online lettings service for London's private landlords. He has over 10 years' experience as a buy-to-let investor in central London.

Article source: Expert Articles

Most Recent Articles in Leases Leasing category

  • Leasing Office Equipment Versus Buying - By: Jennifer Chilton
    Photocopiers are one of the most used commodities in the workplace and can cost anywhere from pound500 to over pound100,000 to buy. Many businesses, especially in today's financial climate, are choosi-ng to lease office equipment to avoid paying such a large initial outlay. -
  • Oil and Gas Leasing - By: Mary Ann Porsuelo
    What is the difference between oil and gas leasing and how are they valued?
  • Is An Extended Warranty Worth The Money? - By: Levi Quinn
    Spending hours at a car dealership can often get you to feel exhausted and bored from long negotiations regarding price and financing. You want to drive away in your new car, but it is then that the actual problems begin. The finance manager will try to talk you into availing an extended warranty, which is nothing but an extended contract for further servicing that will cover the cost of repairs even after the warranty period has expired.
  • Renting Flats and Houses in London: Beware of High Rents. - By: Jay Stevens
    Many landlords, tenants and property professionals are unaware that letting flats and houses at the high rents common to central London can sometimes leave tenants with little legal protection. This article explains how a loophole in the law affects thousands of people renting accommodation in London.
  • London Property: the outlook for rents in the buy-to-let sector - By: Jay Stevens
    With London property prices crashing and house and flat repossessions increasing, this article examines the outlook for London rental values. Will London property fare better than the rest of the UK? Will rents rise as house prices fall?
  • Should You Buy or Lease a Car? - By: Levi Quinn
    You're in the market for a new car and you don't know whether to buy or lease a car. Typically, leasing a vehicle is most beneficial for those who claim their car or truck as a business expense. Nearly all leasing expenses attributed to business purposes can be deducted. However, leasing does have its downfalls. For instance at the end of the lease you'll have no equity in the vehicle. So this practically guarantees that you will either be leasing another vehicle or buying one. Of course some people see this as a benefit rather than an obstacle since they will have a new vehicle at their disposal at all time.
  • Dallas Community: Education is Important - By: Zack Fair
    One of the number one concerns for family's that are moving is information regarding schools in their area. If you are looking for an elementary school within walking distance to your home that has a certain teacher to student ratio you will need to do your homework.
  • Apartment Finder: Furniture is key to a good move - By: Zack Fair
    Looking for an apartment can be a very tedious and time consuming task. Not to mention the stress involved of making sure that the apartment has everything that you want.
  • Apartment Ratings: Hunting down the Right Apartment - By: Zack Fair
    By reading apartment reviews and ratings from both past and current tenants, you can learn a lot from their experiences so as to be able to choose from the vast number of apartments.
  • Houston Apartment Search Tips - Finding a Low Total-Move-in-Cost Houston Apartment - By: Patrick O'Connor
    Houston apartments come in many shapes and sizes. You can usually find a Houston apartment with a very low total move-in cost. Total move-in cost includes the application fee, deposit, and first months rent. Before focusing on the move-in costs, review whether the total move-in-cost is the most important issue in selecting a Houston apartment.