As January comes to a close, Lettings Director Patrick Littlemore looks at the trends and predictions for the 2016 lettings market.
In late 2015, I gave my forecast for what both landlords and tenants might come to expect throughout the coming year. And if the past month is an indication, these forecasts certainly still hold true.
January has traditionally been the strongest month outside of the summer for lettings. As always at this time of year, there is a dramatic increase in the number of new tenancies following the Christmas break. This year however, Marsh & Parsons’ January lettings exchanges are rivalling those summer levels! Indeed, weve seen a 45% increase in the number of tenancies agreed compared to this time last year!
This traditional surge is largely due to people taking new-year’s action and downsizing, relocating abroad, or starting new jobs. Whilst separations and divorces after the festive period also significantly boost demand for rental properties in January, activity is bolstered by the second biggest wave of Corporate relocations. These two seasonal factors have caused a strong surge from both families and single tenants, and properties have been snapped up quickly throughout January.
Regardless of the upcoming buy-to-let legislation changes, demand from the Corporate sector is currently much higher than anticipated. We’ve seen a 12% year-on-year increase in Corporate-sector enquiries in January, predominantly from individuals and professional couples in professional service fields such as; Law, Accountancy & Finance; IT & Tech; and Oil & Gas, accounting for 60%, 15%, and 10% of enquiries respectively. Although Corporate budgets remain tight, individuals are certainly still paying premiums to secure quality accommodation.
Rental growth forecast
Weaker activity at the top end of the lettings market slowed the pace of price rises in the London lettings market last year. However, we’re forecasting a 5% rise in Prime Central London rents over the year ahead – a significant uplift from a 1.9% uplift in 2015. The mid to lower price brackets of the private rental sector still have the biggest room to grow this year especially in popular hot-spots such as Queens Park & Tooting which remain popular, yet affordable.
Locking in for longer
Two-year tenancy agreements increased 18% over the past year, and I expect this momentum to continue throughout 2016. But with around 50% of such fixed-term agreements featuring a rent increase, it’s not the prospect of saving money that’s driving their popularity, but rather the stability of a home for longer. At a time when housing stock is in serious short supply, tenants are seeking out two-year contracts to give them peace of mind, and to put off the stress of searching for a new rental property.
One-bedroom demand spills over into two-beds
One-bedroom homes are the most sought-after rental properties across the capital because of their broad appeal, but these are also in very short supply. This scarcity of property is pushing values up, and when faced with 400-650 weekly rental prices, London tenants are assessing their options and considering the option of quality two-bedroom properties (which have been in better supply) as an attractive alternative. As a result we expect two-bedroom properties to see some of the fastest rental growth in 2016. This will be welcome news for landlords owning two-bedroom, buy-to-let properties, who have seen rental growth fluctuate over recent years.
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