London property rental market now offers higher returns

More London homeowners may want to consider listing their property for rent, as London property rental returns now appear to be improving, due to the increasing number of people looking for property to rent in the capital. In recent months, there has been a dramatic shift in the supply and demand for rental properties, with builders south east London the availability of good quality rental properties in London declining.
London, a thriving cosmopolitan city, has long been a popular place to rent property. But finding a suitable property in London to rent has become more difficult due to a drop in the supply of rental properties caused in large part by a surge in reluctant tenants, according to the Association of Residential Leasing Agents (ARLA).
More tenants are now negotiating extensions to their current rental contracts, due to a relative shortage of alternative rental properties, according to several London estate agents, including Foxtons, a company that boasts a high renewal rate. ARLA’s investigation, conducted among UK landlords and rental agents, revealed that the supply of rental properties has fallen, while rental demand has increased, in part because fewer people are buying property today. Ian Potter, ARLA’s operations manager, said: “Many people who are now able to buy are struggling to find the right property as there is also a shortage of properties for sale and realistic mortgages.”

In the final quarter of last year, an average of 41% of ARLA members surveyed reported more renters than properties available for rent.
Peter Rollings, Managing Director of a major London rental agent, commented: “Stocks seem to be a problem in the rental market. It really confuses me as to where all this property has gone!

“Actually more people are sitting on the fence right now and choosing not to rent their property while they wait to see what happens in the real estate market for sale.”

The increased demand from tenants also comes at a time when the supply of newly built residential properties entering the rental market is falling. The National Housing Federation reports that the number of new homes built in England and Wales is expected to fall this year to its lowest level since 1923. Property developers are on track to build fewer than 123,000 homes between April 2009 and March 2010, 18,000 fewer than were built in the last financial year, due to the fact that most homebuilders scaled back developments to the light of the recession. This year will see the lowest total of new properties since 1923/4, when only 86,000 homes were built, excluding the war years.
“As demand outstrips supply, we are faced with a new challenge: how to offer enough good quality rental properties to meet this demand,” added Potter.
The drop in the London property rental market, coupled with an increase in demand for rental properties, is in turn causing a drop in rental void periods and an increase in rental prices and yields to a great extent. part of London, an attractive proposition for investors in rental properties.
Since January, Foxtons, for example, has had 20% more applicants for rented properties than at this time last year. This demand is causing rent hikes and an increase in renovations.
Rollings concluded: There is likely to be a resurgence in the rent-to-buy market this year, as more people are likely to want to take their money out of banks, where they earn negligible interest, and into something real. and tangible.
“[The London property rental market] will not only give people a current return of up to 7 percent, but it will also provide capital appreciation over the medium term.” A view mirrored by other London estate agents, such as Savills, who project that property price growth will far outpace inflation over the next decade.
Lucian Cook, Director of Savills Research, said: “A recovery in the regionalized housing market is now inevitable with a ripple effect from the major markets in London and the South East.