Welcome to the Jungle
17 September, 2014It's a dog eat dog world and navigating those choppy waters isn't always easy. Whatever your preferred metaphor is, the truth is the same: renting in London is not for the faint of heart.
You need nerves of steel, an understanding boss – for those 5pm dashes to a last minute viewing – and most importantly: a game plan. Deciding to move is only the first part. To make the process as successful and painless as possible, you need to know where you want to go, how much you want to pay, how many rooms you want. New build or old, on or off street parking, transport links, schools, proximity to the pub, park or both, those are the kind of basic things which can get lost in the panic of finding a place in London.
But there's always light at the end of the tunnel and there's also some good news around if you look hard enough. What if we told you that in Fulham, at the moment, there's data showing that as the price per sq ft increases, relative rental prices actually go down?
That needs an explanation. It's all to do with something called rental yield, which for landlords and developers is the rental income in a year divided by the property value. And, obviously, the percentage yield differs wildly depending on where you are. For example, if you buy a two-up, two-down terrace in Salford for £80,000, you might get a rental yield of 12%. But if you buy a house in Chelsea for £3m, that will generate a rental yield of more like 3%. But for the last two-years, Fulham's had a average rental yield of about 4.5%, and this year, compared to last year, we're beginning to see some rents actually coming down, both in yield and absolute terms. And the reason for this is? It's a combination of common sense and changing attitudes towards Fulham, which is maturing nicely. If you own a flat in Fulham and the price keeps increasing each year, you're much less likely to sell it. Instead you'll move to a bigger place, and rent your previous property out. Likewise if you're a serial landlord, you'll be adding even more property to your portfolio off the capital gain you've accrued on what you already have. So what that means is that rising prices actually increase the amount of rental properties on the market, increasing the competition and forcing down rents. Enter our old friend supply and demand. Fulham has a notorious shortage of one-bed flats, but now, there's every chance you'll be able to upgrade to a two-bed property a little more cheaply. You should be able to see some leveling off or saving on bigger houses too. And the best thing is, this is probably part of a long-term trend. And the only thing that would change it would be if property prices in Fulham began leveling off or started going down. Realistically, the only thing that would make that happen is the stress and strains of London – another banking crisis or similar economic event. So with fingers and toes firmly crossed, it's fair to say that for those wanting to rent in Fulham, the future's looking a little brighter.
But there's always light at the end of the tunnel and there's also some good news around if you look hard enough. What if we told you that in Fulham, at the moment, there's data showing that as the price per sq ft increases, relative rental prices actually go down?
That needs an explanation. It's all to do with something called rental yield, which for landlords and developers is the rental income in a year divided by the property value. And, obviously, the percentage yield differs wildly depending on where you are. For example, if you buy a two-up, two-down terrace in Salford for £80,000, you might get a rental yield of 12%. But if you buy a house in Chelsea for £3m, that will generate a rental yield of more like 3%. But for the last two-years, Fulham's had a average rental yield of about 4.5%, and this year, compared to last year, we're beginning to see some rents actually coming down, both in yield and absolute terms. And the reason for this is? It's a combination of common sense and changing attitudes towards Fulham, which is maturing nicely. If you own a flat in Fulham and the price keeps increasing each year, you're much less likely to sell it. Instead you'll move to a bigger place, and rent your previous property out. Likewise if you're a serial landlord, you'll be adding even more property to your portfolio off the capital gain you've accrued on what you already have. So what that means is that rising prices actually increase the amount of rental properties on the market, increasing the competition and forcing down rents. Enter our old friend supply and demand. Fulham has a notorious shortage of one-bed flats, but now, there's every chance you'll be able to upgrade to a two-bed property a little more cheaply. You should be able to see some leveling off or saving on bigger houses too. And the best thing is, this is probably part of a long-term trend. And the only thing that would change it would be if property prices in Fulham began leveling off or started going down. Realistically, the only thing that would make that happen is the stress and strains of London – another banking crisis or similar economic event. So with fingers and toes firmly crossed, it's fair to say that for those wanting to rent in Fulham, the future's looking a little brighter.