Trends in the London Rental Property Market

Spring is in the air and there is a real sense of confidence in the London rental property market with huge infrastructure  projects coming to fruition and the launch of a number of high  profile new property developments. The Sterling devaluation post Brexit presents a real opportunity for overseas investors.

Published on 20 April 2017
 
Spring is in the air and there is a real sense of confidence in the London rentals market. We’ve come a long way from the hype and confusion in June last year when the UK voted to leave the European Union. As I’m sure you are aware, the UK triggered the infamous ‘Article 50’ on 29th March 2017. This means that we now have a fixed timescale for Brexit.
 
Despite so many predictions of economic uncertainty over the past several months, consumer spending has grown as has the UK economy. The FTSE 100 is 17% higher than on the day before Brexit. Growth in the last quarter came in well above forecasts at 0.6%. Even if certain restrictions are made on the levels of immigration into the UK, they will not affect its cosmopolitan nature or the demand for property. London is at the very heart of that success with arguably one of the best public health services and the most highly regarded education system in the world.
 
London is becoming a student capital of Europe with an ever increasing number of universities and training centres. Education has become a theme when we are looking for value. Not just because property prices tend to rise near flourishing schools and universities but because they present interesting investment opportunities if you are based outside the UK. Let’s consider the popular Beaufort Park property scheme in Colindale, North West London. It’s a development by St George, a Tier 1 developer and is situated right next to Middlesex University with many students renting there. Investors who bought off-plan in the first two phases are getting yields above 8%. Even recent investors are still achieving above average yields of 4.5 – 5%.
 
London is also benefitting from huge infrastructure projects that are now coming to fruition including the imminent launch of the multi-billion pound Crossrail initiative that will connect London from the West to East.  And it is already having a positive effect on property values along its route, a trend that will only grow once commuters are able to start using it next year.
 
But the most important incentive to overseas investors is the currency devaluation. The Pound has still not recovered from its fall immediately after Brexit. This has created a huge influx of foreign investors who are keen to take advantage of their greater buying power. 
 
The launch of a number of high profile new property developments is offering tenants plenty of choice. However, with the slow-down in buy-to-let transactions during 2016, the knock-on effect will mean less properties completing in 2018/19. And yet tenant demand continues to climb as lack of affordability prevents them from buying.
 
While the proliferation of new apartments is transforming the landscape in many parts of London, this greater choice for tenants does make the rental market very competitive and landlords must not be complacent – it is essential for them to ensure their rental property is impeccably furnished so that it will stand out from the competition, and experienced landlords are ensuring that their rental properties have that high gloss, show home finish. In a price sensitive market, we are also seeing landlords more prepared to negotiate with existing tenants at renewal in order to keep a good tenant and so eliminate expensive voids. 
 
The redevelopment of the iconic Battersea Power Station is enjoying incredible success with some apartments letting within 24 hours, such is the demand. The development is attracting interest in the area generally, bringing in professionals who might not have previously considered living south of the River Thames. 
 
Apartment at Battersea Power Station
 
Brexit has not changed the city’s economic outlook or its cultural diversity. In fact, it now represents a country with a truly global perspective. That is why the fundamentals in London remain so strong and the outlook for London property is so bullish.
 
 
Written by Lynne Geeves, Director at the Singapore office of Benham and Reeves Residential Lettings.
You can read more about Benham & Reeves Residential Lettings here.
 
The views reflected in this article are the views of the author and do not necessarily reflect the views of the British Chamber of Commerce Singapore.
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