More people forced to seek property to rent in London

New research by Countrywide shows that the UK residential sales market remains relatively static as potential buyers continue to be hampered by mortgage affordability constraints, which in turn is fuelling greater demand for property to rent in London.

Countrywide says that the London property rental sector is buoyant. At a time when mortgage affordability remains a highly important issue despite many lenders easing lending levels in recent weeks.

The number of new tenants' registering for rental accommodation increased by 28 percent in May compared to May 2010. Consequently, there was a 15.5 percent rise in the volume of homeowners considering placing their property on the rental market in May compared to the preceding month.

Low mortgage affordability levels inevitably mean that more people are looking for property to rent in London. The high mortgage deposit barrier means more people are becoming part of 'generation rent' whether they want to or not. As demand for housing continues to massively outstrip supply, the cost of renting a home is also increasing.

With demand for privately rented property showing no sign of slowing down, London-based lettings agents Ludlow Thompson report that the summer season rental rush has already started – two months earlier than last year.

The company also reports that demand from tenants has improved rapidly in recent weeks, despite the summer rush not traditionally starting until July.

Stephen Ludlow, director at Ludlow Thompson, says: "We have seen a real leap in the numbers of prospective tenants so far this summer. Many groups of students and post university young professionals have heard how competitive the rental market is and are trying to get a head start on finding a rental property before the normal start of the summer surge."

There has been a rise in tenant demand across London. From property to rent in Maida Vale and property to rent in Little Venice, to properties in Earl's Court and Kensal Rise.

The greatest increase in inquiries for rental properties in London appears to have come in the corporate sector.

Marsh & Parsons report that a growing number of companies are looking for prime rental properties in London to attract and relocate senior staff to the UK.

A recent report by the leading London-based lettings agency shows that the average budget for a mid-market corporate let increased to £747 per week by the end of March this year – a 14 percent rise on the average budget a year ago. With seasonal growth and an overall rise in competition across the lettings market as a whole, the average corporate budget is expected to increase further throughout the course of this year.

Marsh & Parsons says that the number of prospective tenants searching for properties above £2,000 per week increased by a staggering 30 percent during the first quarter of 2011 compared to the same period last year.

The Marsh & Parsons report said: "As mortgage lending for buy-to-let investors begins to show signs of increasing accessibility for those with sizeable cash deposits, it seems buy-to-let in prime Central London may see a real renaissance this year as wise investors look to take advantage of the booming rental market."

Source: Marsh & Parsons Estate Agents – Property to rent in Kensal Green, Earl’s Court

Demand for properties in Kensington continue to soar

Luxury home prices in Kensington appreciated to an all-time high in June, driven primarily by soaring demand from overseas nationals seeking to take advantage of a weak pound and sought a haven for their assets, according to a new Knight Frank report.

The study shows that the average price of a luxury prime central London property, in areas such as Kensington, has appreciated by 34 percent since March 2009, largely due to growth in Asian investors and a rise in the volume of people escaping the political turmoil in the Middle East.

"A lot of Middle East buyers already own property in London, but we are seeing them upgrading to a larger property to give them the possibility of a more permanent residence," said Mark Pollack, co-founder of Ashton Chase, an estate agent in North West London.

But not only is there greater national and international demand to buy property in Kensington, but research shows that demand is also growing for property to rent in Kensington.

In fact, tenant inquiries are also growing for rental homes in most neighbouring areas, with greater demand for property to rent in North Kensington and property to rent in South Kensington, mainly because of the growing number of overseas nationals coming into the country.

The current Eurozone crisis, in particular, is driving greater demand for property to rent in London, especially in primary locations such as Kensington, Chelsea and Mayfair, among others.

Knight Frank's London Lettings Index shows that since the beginning of the year, European tenants have secured 30.4 percent of all new lets in Central London, compared to 25 percent during the same period in 2010.

Excluding very strong year-on-year growth in the number of new French tenants, up 80 percent, the biggest growth in new tenant volumes came from the so-called PIGS countries: Portugal, up 62 percent year-on-year, Ireland (up 76 percent), Greece (up 33 percent) and Spain (up 73 percent) pointing to a rise in professionals and high-ranking executives re-locating to London.

Prime central London lettings volumes have increased by seven percent year-on-year and rents have risen by almost 26 percent since the low point they hit in June 2009, to hit a record high.

Liam Bailey, Knight Frank's head of residential research, comments: "European demand has been a constant feature of the central London lettings market, with French, Italian and German tenants taking substantial shares of lettings."

The rise in London rental prices of course means that landlords are yielding higher rental returns.

With tenant demand for London properties continuing to rise, almost a third of landlords – 29 percent – said that their rental income increased during the second quarter (Q2) of 2011, according to research by buy-to-let mortgage specialist Paragon.

The study reveals that 13 percent of landlords surveyed have increased rental rates across their portfolios by between two and four percent, saying they had increased rental income up to six percent.

Nigel Terrington, Paragon Group Chief Executive, said: "Results from our latest research shows that rental income has increased steadily during the second quarter. Landlords are continuing to experience high levels of demand for their properties so have been able to make small increases to rent levels, without making accommodation unaffordable."

Source: Marsh & Parsons Estate Agent – Property to rent in London, Chelsea, Mayfair