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 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.
Private tenants who pay their rent on time should see their credit rating boosted in order to make it easier for them to gain a foot on the housing ladder.
That is the advice being given following a survey of almost 3,000 buy-to-let landlords carried out by the Residential Landlords Association (RLA), which found that 61% of landlords would support such a move.
Credit rating agencies do not currently routinely include rental payment history when calculating credit scores. This means a tenant can find it difficult to access a mortgage, even if they have a long history of rent being paid in full and on time.
The RLA believes that including rental payment history in this way will also allow landlords to make a more accurate assessment of a prospective tenant’s suitability, and are subsequently calling on the government to work with the industry and recommend that it is included as a standard feature when calculating credit scores.
The RLA’s chairman, Alan Ward, commented: “With many tenants wanting to buy a house of their own, it is absurd rent payment is not routinely included when undertaking credit checks for mortgage applications. Moving to such a scheme would help not just tenants, but also landlords by giving them a clearer sense of whether a prospective tenant has historically paid their rent in full and on time.” Source: Landlord Today
According to research by Countrywide, rents in London have fallen annually for the first time in nearly six years. With average monthly rents at an eye-watering £1280, this adjustment has resulted prices for new lets dropping by an average of £7 per month, in comparison to the same time a year ago. The last time rents fell in the capital was in November 2010, when the average monthly rent in London was a comparatively cheap £923 per month.
The housing market earlier this year saw a number of landlords rushing to push through their purchases as a result of the 3% stamp duty hike levied on buy-to-let properties, which came into force on April 1st. The majority of these properties are likely now on the rental market, which improves the choice for tenants and should result in further depression of London rents, particularly in Prime areas where transactions are comparatively low.
Last year in July in the whole of the UK, 16% of tenants paid over the asking rent to secure a tenancy on a home compared to 7% in July 2016. The falling rental figures were much more significant in London in comparison, with only 11% of homes letting for more than the asking price in July 2016, a drop from 32% in July 2015.
At City Living London we have always sought to price our properties competitively with a view to finding long term, happy tenants. Our average monthly rental is below the London average, at £1147.50, and our tenant fees are similarly competitive at £270.00. If you move again through us, these fees are discounted by 50%, meaning our fees for return tenants are some of the most affordable in London.
Although rental price growth has slowed, current market dynamics are likely to accelerate the growth of renting, suggests Countrywide. With more stock and higher levels of demand, the increasing number of rented households looks set to continue to increase in 2016.
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.