As we venture in to October its noticeable that things have begun to change; we are starting to lose the light, the weather has certainly taken a turn for the worse, but we also consider that October is one of the busiest months of the year in lettings, applicant registrations are on the up and for some so are rents.
This month I sat in with Thorgills Branch Managers whilst they talked through the market in West London and what it's doing? Are rents up on last year and if so by how much? If rents are increasing what is the driving force behind this? And what affect would all this be having on both tenants and landlords? Here's what I learnt.........
It would appear as though rents are up across the board. Whilst rents have steadily risen for the last few years, it seems that over the last 12 months the rise has not been quite so aggressive. There are a number of factors to consider, firstly there must be a ceiling and as rents approach this ceiling it is only natural that the increase gradually slows. Furthermore, the level of properties Thorgills has seen become available this year is significantly higher than the previous 12 months. Simple economics will dictate an increased supply will slow demand and should reduce any rise in price, but applicant registration levels are still showing steady growth so the demand is still there, offering at least a smaller rise in rents. So, how much are rents increasing by? This question really depends on who you speak to and what school of 'spin' they believe in. Thorgills believe this year on average rents have increased by an average of 5 to 10 percent across the board. A very sweeping statement that certainly offers little clarity, the reason for this is that there are so many different areas to consider. Firstly the smaller properties ranging up to the three bedrooms have been in huge demand, and have certainly dictated price increases. The larger properties and top end properties have not necessarily been able to demand the same, this end of the market has experienced an exceptional few years and pushing these prices up would prove difficult. New build developments are as fruitful as ever, with developments built within the last few years being treated like gold dust. Tenants are putting themselves on waiting lists to get these good quality properties and corporate clients are flooding back to the market, this is certainly an area where price increases have been significant.
The other factor to consider is what the rent increase is based on. For instance is the increase based on a tenancy that started last year, two years ago or even five years ago? This is where the results begin to differ, based on new tenancy agreements signed over the last 12 months involving new tenants at a property, it looks like rents have increased by 5 to 10 percent. But it would also be very easy to quote some outrageous rent increases; in one case Thorgills achieved an increase of nearly 40% for a landlord that had been happy to rent his property at below market value to a friend for some time. This raises the question who is setting rent prices and who is driving them up? It was firmly agreed that conditions in the sales market had affected the lettings market for some time now. Huge amounts of people were resorting to renting rather than buying, but perhaps more importantly, the other side of the coin is that buy to let investors have found it difficult to secure the finance required to purchase. This leads to a dwindling level of properties available on the market and certainly pushes prices up. Something else to consider was the increasing level of new build developments springing up, these highly desirable properties always fetch a premium, pushing market average rents up. Then there is of course your stereotype agent, over promising and under delivering. Whilst these agents will do whatever they can to win an instruction, their over pricing has certainly played its part in driving market prices up. It only takes a few agents to take this approach to winning instructions, before landlords see properties down the road from theirs being advertised at extortionaly higher rents and want to try to achieve the same. This domino effect hits all properties and before you know it prices across the board have been pushed up. The other people to consider are landlords themselves; in today's world where purse strings are being tightened daily, everybody wants to achieve the best possible return on their investment. Some landlords are happy with below market value for a certain tenant, but more often than not it's the top end rent that is most desirable.
So what affect is this having on the people involved? Agents will give varying feedback, but what must be remembered is that whilst we work for our landlord clients, we must advise what makes most sense. Not just for the good of a landlords pocket now, but also for the future of their investment and possibly the market their property sits in. Landlords will, perhaps surprisingly also offer varying opinions, some are ecstatic with what is happening; more rent, more money and the potential to reinvest and build up that portfolio. Some Landlords are happy to keep prices at a reasonable level and are wary of a bubble that could burst or even lead to government intervention, with price capping across the board. And then of course, you have those landlords that every tenant loves, they offer their properties at under market rent to secure those really great long term tenants that stay for years. These landlords are not interested in driving prices up, they have their property for the long haul and like the idea of people taking care of it and making their lives as easy as can be. The only other group to consider is the group that will be most affected by these rent increases, the tenants. I think I can categorically state that tenants are not best pleased with what the market is doing, but unfortunately for them it is currently out of their control. We are seeing increased levels of tenants wanting to renew, knowing that they are paying last years rental price and that re-entering the market is likely to lead to higher rent. At this time, if you are a tenant and you are happy with where you live the best advice I can offer is to sit tight. If your landlord wants a rent increase and it is less than 10% I would consider that to be good value rather then looking at it as an increase on what you paid for the last 12 months. Try to see it as probably cheaper then what you would pay if you tried to find a new property. This will certainly not apply to all properties and you should always conduct your own research, but generally this is what Thorgills is currently experiencing.
With rents on the up across West London it's important to work with the right Agent to ensure you are getting quality results. If you are a landlord or tenant and require any advice whatsoever please contact your local Thorgills Branch. Remember we are voluntary members of both the National Landlords Association and the Property Ombudsman, so our work is always carried out to the highest standards. Thorgills advice and valuations are free so please do not hesitate to get in touch.