More and more Londoners are privately renting these days, and it seems that the rental market is only going to keep rising, says Graham Norwood.
London property headlines focus on sales – unsurprisingly, really, when some homes hit £100m. But the biggest growth sector in reality is the capital’s burgeoning rental market.
Statistics reveal why. Over 30 per cent of households in inner London now rent privately, forecast to rise 40 per cent by late 2020, as renting increasingly becomes a lifestyle choice and not just an economic necessity.
Mix in the current short-term uncertainty in the sales market – increased stamp duty on high value properties now deters many buyers – and it’s easy to see why the rental market has become the most dynamic element of London’s property scene as we head into 2016.
‘When the sales market is soft, the rental market tends to be strong – and it certainly is in Prime Central London at the moment. There’s been a surge in demand,’ explains Guy Meacock, head of London for buying agency Prime Purchase.
‘Renting looks like a more attractive alternative for many,’ says Rachel Thompson, partner at The Buying Solution, the buying arm of the Knight Frank estate agency.
But anyone considering becoming a landlord must realise that the days of tenants being undemanding, undiscerning and frequently unprofessional are over. Today’s tenants are shrewd and sophisticated, driving specifications upwards to match rental levels.
Homework is essential. Equipping a flat with a lower specification than required or in a location that is unpopular with professional renters may mean significantly lower returns.
‘A concierge would be a minimum for a PCL apartment with new developments factoring in the possibility of a more lifestyle-oriented service being available – to book taxis, restaurants and the like,’ says Dan Parker, of letting agency Savills. He could add in hotel room service and same-day dry cleaning as ‘must haves’ in many cases, too.
The type of property in demand from tenants falls into two categories, say agents. Firstly, the refurbished period gem in a classic location. An example is this four-bedroom house on Ledbury Road, which has been recently refurbished to the very highest standards. This lets at £5,000 per week through Strutt & Parker.
Secondly, there is the new-build, full-creature-comfort property in an emerging part of prime London – modern developments like Pan Peninsula at Canary Wharf have three-bedroom apartments from £5,000 per week through Foxtons. A brand new apartment at an iconic development – Battersea Power Station, say – will let for much more. International tenants, often from the Far East, are enthusiastic devotees of new-build homes.
Buying an appropriate rental property will be expensive; upgrading and managing it will add to the bills. Yet while the bar is high for potential London landlords, returns are good too: Savills forecasts that by the end of 2020, PCL rents will have risen 17.1 per cent from today’s levels, and capital values
will have risen 22.7 per cent.
In theory, that means a huge potential return, far beyond most alternative investments. You see – the rental market really is the best show in London these days.