Well, that was a busy Summer wasn’t it? As the country twisted and turned on its axis, many homeowners and people who make or supplement their living through property were left with an armful of questions and very few answers. But now the dust has settled we have time to take stock and try and answer some of these questions.
For landlords and those in the buy-to-let market, Summer is a busy period, but come September it’s time to begin looking ahead and making plans for the future. And never has this been more important than after the 52% to 48% Brexit result that triggered major economic uncertainty. In the weeks immediately following the result, it became clear that all markets, especially property, were going to take a hit, and the experts did nothing to sugar-coat the situation. A spokesman for The Council of Mortgage Lenders told the Guild of Residential Landlords soon after the result, “In the short term, people’s attention will be on interest rates and what impact this will have on mortgage costs. While markets are bound to react to the news, the question will be how long it takes for them to settle.” Of course the recent reduction in interest rates has calmed the market on this front considerably. This is making mortgages even more affordable adding scope for Landlords to buy more rental property and allow more people to buy their first buy-to-let.
Cheap lending, expanding generation rent and an uncertain sales market have all contributed to rentals looking more like an attractive option. This has led to rental prices softening in Fulham. There are several factors that have lead to this.
In light of the uncertainty in the sales market, many would-be sellers have decided to sit on existing properties while the market corrects itself and instead put their properties on the rental market. This dramatic increase in supply has led to rental prices weakening, which has been especially noticeable in house rental prices. This is because the ‘Brexit’ result hit at the prime month for house rentals, July, when supply was already at peak levels. This resulted in a reduction in house rental prices on last year in Fulham of 7.1%, while flats were down a little less at 5.5% according to Brik’s data.
Exodus of foreign nationals?
The fear was that the insecurity around the city – will the banks stay or go? – would lead to a loss in the appeal of London as a destination for short-, mid- and even long-term foreign renters. However, after the pound hit a thirty-year low following the referendum it seems, so far, that foreigners and foreign businesses are not only getting a lot more for their money but at the same time are more cautious about large rental commitments. It’s fair to say that at this point these two cancel each other out nicely.
Poor relative condition
In general the majority of Fulham rental stock is no longer at the level of finish and quality that discerning Fulham renters demand. With about thirty properties coming up for rent in Fulham every day over July, it should come as no surprise that tenants can afford to simply reject property that is not up to scratch.
What is interesting is that properties that are well finished seem to be achieving relatively higher rents than expected, leaving the rest to contend with low offers or no offers at all. This is because better finished rental properties attract more than their fair share of interest. The fact is your average Fulham resident now expects a higher standard of property than they might have accepted ten, five or even two years ago, and it’s important to mention that this is true right across the rental price spectrum from one bedroom flats to large houses.
Increasing property prices
As property prices increase rental yield decreases. Yes, your house or flat probably rose by 20% or more since 2012, but that doesn’t mean that a tenant will pay 20% more in rent for what is essentially the same property in their eyes. That said, if the value increase is attributed to a refurbishment then often some of this value can be extracted from the tenant. Bear in mind rental prices are driven by the desire of tenants to live in both the vicinity and the property in question.
So with the Summer’s medal haul from the Olympics and the recent surprise positive results from Brexit on the economy, it seems that brand Great Britain is only going to get more desirable. Good news for your rental, so long as you make the most of its potential.
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