Landlords putting pandemic behind them and tapping into London’s rental growth
The pandemic has forced all of us to spend far more time at home over the last year and a half, causing our homes to double as our workplaces and even as schools for our children.
Inevitably, for some people what seemed the perfect property back in 2019 has not quite cut the mustard come 2021.
It’s one thing to pay that premium rent for an apartment in the middle of London when that means a small commute and an exciting city at your fingertips every time you leave the front door. But when commuting isn’t really an issue as you’re working from home, and all the bars, pubs and clubs are closed, then that premium rent may start to stick in the craw.
The pandemic effect
Unsurprisingly, the London rental market bore the brunt of the pandemic, with Connells reporting 13 straight months of falling rents in central London.
Things are changing though, as the city starts to reopen and kick back into gear. The appeal of city life is clear once more, with demand from would-be tenants meaning that in June Connells reported a 4.3% increase in rents for central London, taking them to an average of £2,103 per month.
Not only does that reverse the trend of falling rents, it’s also the biggest jump for a single month ever recorded.
Scarce supply
Another positive for London’s landlords to take from the current market is the lack of options for tenants.
The most recent analysis from ARLA Propertymark noted that while the average letting agent in the UK has 184 properties on its books, rental stock is lowest in London where it stands at just 112 properties per branch.
That lack of supply means that when quality properties do hit the market, they are quickly in demand from tenants, reducing the risk of void periods. What’s more, this level of competition will drive up rents, meaning investors enjoy meatier yields from their assets.
Indeed, as the Connells report demonstrates, we are already seeing landlords across the country feeling sufficiently emboldened that they can increase rents. That same ARLA study found that in June 2021 60% of agents reported their landlords had increased rents - a record high for the month of June.
This is unlikely to be a short-term trend either. Analysis from Savills suggests that rental growth in London for 2021 is likely to stand at around 1.5%, almost double the 0.8% seen across the UK as a whole, while by 2025 it argues that rents in London will grow by 19.3% compared to 17% for the country overall.
That’s a substantial return alongside the expected capital growth that landlords will enjoy through investing in London, particularly those at the prime end of the market.
Finding finance
For many professional investors, bridging finance is a vital tool when it comes to expanding their portfolios. But bridging lenders come in many different forms, which is why it’s so important for brokers and their borrowers to be clear about which lenders truly understand their business and can deliver finance swiftly.
After all, investors always want to move quickly. Once they identify a winning property, they want to get their hands on the keys immediately, before the competition has a chance to place a bid of their own.
For bridging lenders to stand out, we need to not only come up with compelling product designs and rates, but back up those deals by delivering the funding required on time, every time. Brokers have long memories and remember well those lenders who let them down, causing their clients to miss out on what could have been a valuable deal. Delivering a high level of service, each and every time, isn’t easy but it’s what lenders have to do if we want to stand out from the crowd.
After all, the signs are there that London’s landlords are set for a profitable few years. But to do so, they will need funding partners to secure those investments.
Elena Panayiotou, Loan Officer, London Credit
