Investment
London residential rental market strong, new reports suggest
The London rental market has bounced back to see rental values rise by more than 4% across most of central and east London with healthy gains seen across most of the rest of the city. The research by analysts at Benham & Reeves Residential Lettings cite the crippling effect of the new stamp duty rates on the sales market for the strong rental market as tenants eschew home ownership in favour of long term tenancies. The prime central London market saw strong gains last quarter after several quarters of stagnation, and continued to see strong growth this quarter, the data also shows. Many of the tenants are overseas professionals who are opting to rent long term as the cost of renting often represents a saving compared to purchasing a home in high value areas thanks to the 12% top rate of stamp duty. The rental market in east London is also very strong but for different reasons. The tenant demographic is typically younger and more likely to be British. However, many of these tenants are deliberately choosing to rent rather than own a property as a lifestyle choice, the report suggests. It explains that many of the millennial generation do not view home ownership as a goal and recognise that they can often afford to rent a much better property than they can afford to buy. Millennials are also a more mobile workforce who change jobs more frequently than previous generations. North London was one of the few areas to see rental values fall. A number of new developments in north London have seen the property supply increase. Locations on the Northern Underground Line have also fallen as the Central Line interchange at Tottenham Court Road has been suspended for several months while the station is rebuilt for Crossrail. ‘From an investors' perspective, it is very interesting to observe demographic changes. One of the reasons the rental market tends to remain so strong in areas such as east London is because these areas attract Millennials who are content to rent long term,’ said Marc von Grundherr, lettings director at Benham & Reeves Residential Lettings. ‘They're simply not willing to scrimp and save for years to afford a deposit but prefer to live for the moment. This concept even extends to where they choose to rent as they'd much rather live somewhere central close to good bars and restaurants than commute in from more affordable areas. For as long as East London remains hip and trendy, it will continue to attract good quality tenants,’ he added. Separate research from JLL also suggests that the lettings market in London is strong. According to Tom Middleditch, associate director of the firm’s Kensington office said September was particularly strong and added that landlords should still see this as the ideal month for their properties to be coming available. ‘Taking the months of August and September, we seen a 49% increase in tenancies starting than in the… Continue reading
Residential rents in Scotland up at less than a third in England and Wales
Scottish rents are rising at less than a third of the rate seen in the rest of Britain, amidst the controversy of the new Private Housing Bill, according to a new buy to let index report. Average Scottish rents have risen just 1.7% in the past year, less than a third of the rate currently being witnessed in England and Wales, according to the data from lettings agent network Your Move. Year on year the index show that while rents across England and Wales have increased by 6.3% in the past 12 months, annual rent growth in Scotland has plateaued after a summer uplift. The data also shows that rents in Scotland fell 0.3% from August to September 2015, the second consecutive monthly drop in Scottish rents, meaning that the typical rent in Scotland is now 0.8% lower than at its summer peak in July. The average monthly rent in Scotland was £545 in September 2015, compared to £549 in July 2015. However this is 33.3% cheaper than in England and Wales during September. ‘All eyes are on the proposed reforms to the private rented sector in Scotland, but there is a crucial element missing to the debate. Rents are not going up quickly enough to warrant the staggering rise in tenant arrears we’re seeing. Rather, tenant finances have much more to do with deeper rooted societal problems of salaries and employment levels,’ said Brian Moran, lettings director at Your Move Scotland. ‘Over the summer we witnessed a short term surge in rent prices, but this has been superseded more recently with a slower rate of rent growth, which doesn’t even come close to what we’re witnessing south of the border. Scottish rents have been falling for the past few months, and realigning to calmer levels for the autumn. This is even more extraordinary when you consider we’ve just weathered peak lettings season. It’s certainly not a sector spiralling out of control,’ he explained. ‘This auto-correction, and natural flow of the lettings market will be disrupted by artificial interventions from the Government. Private sector landlords could soon face a regulatory minefield, and this may dissuade future investment into buy-to-let at a time when we need to be the sector to grow, not contract. Ultimately, where the supply of rental properties uncouples from demand, rent growth will be massively thrown out of kilter, and tenants will find themselves even more exposed,’ he added. A breakdown of the data shows that all but one region of Scotland has seen rents increase over the past year. The strongest annual rent growth has been recorded in the Highlands and Islands, with rents up 6.4% since September 2014 to reach a new high of £572 per month. This represents the fifth consecutive month that annual rent growth has accelerated in this region, and the fastest year on year increase on record… Continue reading
New home building sector in Australia sees three years of growth
The new home building sector is the star performer of the Australian economy having seen three years in a row of growth, according to the Housing Industry Association (HIA), the voice of Australia’s residential building industry. The latest data from the Australian Bureau of Statistics show that despite a modest decline in new dwelling commencements in the June 2015 quarter, there was still a record number of 211,976 new homes started in 2014/2015, an increase of 16.9%. ‘That is a phenomenal result which caps three consecutive years of growth for new home building, only the fifth time in the last 60 years that this feat has been achieved,’ said HIA chief economist Harley Dale. ‘Through its broad reach the new home building sector has delivered a strong economic dividend to Australia during a period when many other sectors of the economy have struggled,’ he pointed out. He also explained that while new dwelling commencements will fall in 2015/2016 they should remain elevated at what would still be the second highest level on record. ‘The key to the short term prospects for new home building is how much work in the pipeline is converted into actual activity and it’s not coming through as quickly now. An orderly decline in commencements in 2015/16 remains the most likely outcome,’ Dale added. A breakdown of the figures shows that there were 53,314 dwellings commenced during the June 2015 quarter, a decline of 3.2% from an upwardly revised March quarter. Detached house commencements fell by 2.9% to 28,046, while ‘other dwelling’ commencements declined by 4.9% to 24,482. But there are regional differences. New dwelling commencements increased in South Australia by 12% in the quarter, by 54% in Tasmania and by 76.4% in the Australian Capital Territory. But they fell by 1.6% in New South Wales, by 0.5% in Victoria, by 9.6% in Queensland, by 10.5% in Western Australia and by 36.1% in the Northern Territory. Meanwhile, the latest data shows that prices growth for land for building new homes has eased off slightly. The latest HIA-CoreLogic RP Data Residential Land Report shows there was some relief from the tight conditions in Australia’s residential land market in the June 2015 quarter. National residential land sales increased by 17.6% while the weighted median residential lot price increased by 0.6% over the quarter to 5.2% higher than 12 months earlier. ‘A rise in land sales was accompanied by an easing off in the pace of price increase in Australia’s residential land market. This compares with previous quarters which saw strong price increases amid declining land sales,’ said HIA economist, Diwa Hopkins. ‘While the June quarter result is an encouraging development, what needs to occur is similar results being sustained over the longer run. That is, a larger and more consistent flow of shovel-ready land needs to be brought online,’ she explained. ‘For this to happen, policy reform needs to address the key land supply bottlenecks including unnecessarily long planning delays, slow… Continue reading
