Are you a tenant looking to rent a property in Central London this summer? It can be a challenging process as during summer time tenants are fast, smart and extremely competitive. Here are some top tips for tenants to avoid getting stuck in the process:
- Avoid delay
- Properties tend to go really quick during summer, so if you really like it, secure it fast. Chances are someone else shares your great taste and will like the same property. It only takes one extra person to create a competition, therefore always looking for something better can turn into a big mistake.
- Have your references ready
- Not having your references ready can really delay the process of your moving into the property. Therefore, you should prepare to have a work reference confirming your employment and a previous landlord’s reference ready when requested for them. Landlord references will confirm if you have paid your rent on time. If you have a bank reference or three months relevant bank statements ready, that can also put you at a significant advantage.
- Have funds ready and ready to sign
- Most tenancy agreements will follow a similar format and should be relatively easy to read. Tenancy agreements and other related documents should be a complete priority, as the agreement will need to be signed before you move in. The longer you leave it the higher the chance of losing the property to someone else. You will also need to start thinking how and when you can pay, therefore have the funds ready.
The city of London is now offering new opportunities when it comes to house buying, with almost 65,000 affordable new homes planned to be built in the capital per year.
Sadiq Khan, the Mayor of London, has a draft London Plan, which means that the London property map will be significantly changed. Due to high prices in parts of central and inner London, young buyers have had to look at other areas if they want to invest in property.
Parts of London that would not normally be top of a property shopping list are being revitalised with a series of regeneration projects and transportation upgrades, which is creating brand new hotspots and opportunities that are hard to ignore. The Mayor’s plan has set out targets for each borough in the city as well as identifying ‘Opportunity Areas’ in which large amounts of investment are being directed. These ‘Opportunity Areas’ are priority zones where development and regeneration are to be progressed.
There are as many as 30 areas designated for this attention, and the process has already begun in Stratford and Nine Elms. It now seems that Charlton Riverside, Colindale, Cricklewood, Harrow, Kensal Canalside, Catford, New Cross, Ilford, Southall, Park Royal, Woolwich, Thamesmead and Abbey Wood are next in line for a period of regeneration.
Buying a property in London has never been easy, but moving away from the typically popular areas to these up and coming hotspots could prove to be a profitable investment.
The average rental values for existing homes in Prime Central London have been falling for more than two years due to rising supply but the pattern is now due to reverse. There was a large spike in new lettings properties in the middle of 2017, which followed the introduction of the additional rate of stamp duty in April 2016, one of the reasons behind the increase. The other key factor has been a growing number of ‘accidental landlords’, a group of would-be vendors who are waiting for more pricing certainty before they return to the sales market.
The rate of new lettings properties coming onto the market has slowed. In 2017, November was the first month to reflect a decline in the number of new lettings properties placed on the market, with a fall in instructions of 1.2%. There was also greater demand than in 2016. Both factors combined will strengthen rental value growth. From January to November 2017 there was a 19% rise in viewings in comparison to 2016. The number of tenancies agreed also rose by 14% over the same period, whilst on average 17% more new potential tenants registered with PCL agents.
In a world of low returns, the Prime Central London lettings market became a comparatively more attractive asset class in 2017 from an investors view. Currently, the average gross yield in prime central London is 3.2%, higher than the risk-free rate of a 10-year UK government bond, which was yielding approximately 1.2% in mid December. The stretch between the two is high by historic standards; this trend is likely to continue with bottoming out sales values which will boost total returns. There is no immediate likelihood of a rate rise, despite the fact that UK inflation rose to 3.1% in December. Subject to the usual requirements, the Bank of England expects the base rate to be 1% in 2020, which is still low by historical standards.
A recent investigation has found that the Help to Buy scheme is not in fact helping everyone, with many UK homes priced out of the scheme, particularly in London, according to BBC. The scheme was set up last year to help young people onto the property ladder, with the government saying that the cap ensures that the scheme is intended for first time buyers. It was introduced to allow first time buyers to put their deposit into a tax-free savings account and get a 25% bonus, up to a maximum of £3,000 when they buy their home. The price of a house under the scheme cannot exceed £450,000 in London, or £250,000 everywhere else in England. However, the Help to Buy ISA only gives savers a £3,000 bonus on their deposit if the price of the house is below the cap. In addition, starter homes exceed the price cap in many areas across England. Shelter, the housing charity, has been quoted as saying that it only helped a few and the government needs to focus on building more homes.
Average asking prices exceed the cap in 65% of the areas in London, 67% in the South East, 61% in the South and 53% in the East. In London, an average two bedroom flat exceeds the cap in two thirds of boroughs, while one bedroom flats exceed the cap in a third of boroughs. Only 10% of three bedroom homes in London fall below the cap. Outside of London, a two bedroom starter home exceeded the cap in 28% of the UK.
Therefore, in terms of monthly outgoings and despite the average Londoner outlaying nearly 30% of their monthly income on rent, renting is often still a less expensive option than the Help to Buy scheme. In London and the South East especially, where the property prices are highest, renting tends to be cheaper than the monthly mortgage payments.
If you are about to start searching for a home in London, please contact us on 020 7351 6100 and we would be delighted to show you any listings which may suit your requirements.
Lonres is an agent-only website which collates and analyzes data on the Central London property market based on the feedback and information provided by its subscribers. According to their most recent quarterly newsletter, the London’s lettings market has been quieter than expected over the last three months. In the first quarter of 2016, the number of the tenancies agreed in Prime Central London fell by 18% compared to same time last year, whilst the rest of London and its surrounding areas have also shown a decrease in new lets agreed. An increase in renewals is contributing to this decrease in the number of new tenancies agreed which is most likely down to the political uncertainty caused by the EU referendum, due in June, and the subsequent possible unravelling of the market following a Leave vote (please refer to our EU referendum blog)., Agents have seen a significant drop in the number of new applicants and viewings, particularly on the corporate relocation front whilst The City awaits the results of the referendum. Properties at the upper end of the lettings market have attracted fewer applicants and viewings. However, on a positive note properties under £750 per week have shown an increase in demand, with one and two bedroom properties having performed strongly.
More generally, the lowered levels of activity reflect the amount of competing supply across the Prime London market, suggested by the level of investment buying activity seen in new build sectors and second homes. In the first two months of 2016, the number of mortgages completed for buy to let purchases was 26% higher than the same two months of 2015. The majority of the buying activity was concentrated in the market between £500k and £1m. This suggests better rental performance of these properties and higher income yield returns available.
Going forward, the outlook for rental growth over 2016 remains unknown and restrained due to the uncertainty caused by the EU referendum. It is becoming difficult to predict how the market will progress over the rest of the year, however a recent survey by Lonres suggests that 29% of agents believe there will be a rise in achieved rents by the end of 2016, with only 3% expecting rents to increase 5% or more.
Stamp Duty Land Tax (SDLT) is a tax paid when purchasing a residential property (freehold, leasehold or shared ownership) over £125,000 in England, Northern Ireland and Wales. The tax is due to be paid in full within 30 days of completion of sale.
Since December 2014, rates were payable only on the portion of a property price which falls within each band. For example, if you brought a property for £750,000 you would pay no stamp duty on the first £125,000, then 2% between £125,001 to £250,000 and 5% above £250,001.
From April 2016, the existing stamp duty rates are increasing by 3% for people who are purchasing their second home or a buy-to-let or holiday home. This includes if you buying with a partner and only one of you owns a home. If you are buying a second home to replace your existing home, a surcharge will need to be paid without selling your home first. Nevertheless, a refund can be requested if you sell your first home within 3 years. The surcharge still applies if you are first time buyer in the UK but you are an owner of a property abroad.