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London's lettings market - James Bailey, Henry & James

Unprecedented lettings

The lettings market in London is unprecedented. We, like many other agents in central London, have been extraordinarily busy over the past few weeks as tenants try to secure a property before the start of the next academic year. Families obviously want to be settled before enrolling their child at the nearby school and as the financial sector continues to gather pace, we are seeing a huge influx of corporate tenants seeking homes.

Problem is, there just is not enough stock. We have seen a number of short-term landlords sell their investments over the past couple of years but not many buy-to-let landlords have been tempted back into the market. That, coupled with the fact that many “accidental landlords” – those who wanted to sell but ended up letting their property instead – have managed to sell their homes, we are left with a dire shortage of rental properties.

Current tenants are also more likely to renew in this climate. They know that if they leave their current accommodation, they are unlikely to find anything better at a lower rent. If anything, they might find themselves paying more for an inferior flat.

We recently had a flat on the market for £518 per week. Three potential tenants were keen on it and a bidding war soon ensued. It ended up being let for £650 per week, a 25 per cent increase!

I doubt this situation is going to resolve itself anytime soon. Buy-to-let mortgages are still very hard to come by and many people’s faith in property as a short-term investment has been shaken. Of course, property was never supposed to be a short-term investment but a steady, long-term one. Those who have held on to their rental properties for five or ten years (or longer) will have rental income to cover the mortgage costs and maintenance but have also enjoyed a substantial capital return.

The recent rise in Capital Gains Tax has not helped matters, either. Most property investors are older and therefore are higher earners. The prospect of paying 28 per cent CGT when the flat or house is sold is going to be a deterrent for many. That means that professional landlords and investors own most of the rental properties currently on our books. It also means that for now, tenants are going to have to cope with a landlord’s market.

James Bailey

James is head of sales at Henry & James. www.henryandjames.co.uk


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