Rents peak and void periods hit eight year low
Tue 28 Sep 2010
The BBC recently reported that rents have reached their "highest for two years as landlords sell up" following a survey by LSL Property Services Ltd. Meanwhile, ARLA have released their most recent survey results, showing that void periods between tenancies are at an eight-year low, usually an excellent indicator of the buoyancy of the lettings market. Whilst these statistics are encouraging for landlords, are they actually reflected in the Central London lettings market? On the whole, the answer is a resounding 'yes'.
September is always the seasonal 'peak' in the lettings calendar, with demand from prospective tenants at its strongest. Demand has been focused on one and two bedroom flats, satisfying the young professionals/graduate/student market, whereas over the summer, the peak in demand was at the very top end of the market, above 1,000 per week.In contrast, supply of property has remained low. There has been a noticeable shift in landlords deciding to sell their property instead of letting as the "reluctant landlord" tenancies come to an end. In fact, in some cases, owners are marketing their property for both sales and lettings, basing the outcome on the offers that they receive. A recent property in a prime Notting Hill location, on the market for both sales and lettings at over 2,500 per week and over 3.8 million respectively, received strong offers from both sides of the business; the owners decision has been to let the property on this occasion.
With supply of properties on the market so low, it's essential for tenants to move fast if they find something they like. In August and September, over 35% of the offers received on properties from prospective tenants were in competition with another party. Indeed, there have been multiple instances of properties receiving more than three competing bids within 48 hours of coming onto the market; a recent one bed flat on Palace Gardens Terrace in Kensington received four offers within 24 hours, with two out of the four prospective tenants being fantastic corporate tenants one a bank and one an embassy. The property was, in the end, let for more than 10% over the asking price. Whilst all of the above means landlords are often finding themselves in a strong position, they also need to be mindful of making quick decisions when receiving offers; tenants are being forced to be decisive in this competitive market, which means they like to get quick responses in return, otherwise they are highly likely to go elsewhere.
Our Renewals Department has also seen a very busy start to the Autumn season with the majority of tenants agreeing to increases in their rent in order to remain in their existing property; likewise, many are keen to renew for longer-term tenancies to avoid further increases six months later in a strengthening market. Many landlords are asking us to re-value their properties at the point of renewal to ensure that we are able to negotiate the optimum market rent on their behalf; in some cases our specialist renewals negotiators have secured rent increases of up to 15%. It seems tenants are realising the benefit of 'staying put' in such a competitive market.
Without question, 2010 has seen a dramatic recovery for the lettings market compared with the beginning of 2009, when rental voids were close to an all-time high in a market saturated with available property. Investment of buy-to-let property fell significantly over the past two years as access to mortgages has remained difficult. However, with such increased activity in corporate relocation at the top end of the market, as well as the continued strong demand from would-be first time buyers in the lower and mid-market, it seems likely that confidence amongst the landlord community will continue to grow and if finance availability starts to improve, we could see a welcome resurgence of new buy-to-let landlords into the lettings market.