Hard to believe, but June is here already! Kicking off with a four day weekend and the Queens Jubilee Celebrations, swiftly followed by the 2012 European Championships and the preparation and anticipation that is to accompany the 2012 London Olympic Games. London really does feel like the place to be this summer, popular with everyone looking to be a part of the entertainment and celebrations, not to mention the ever increasing number of tenants on the hunt for rental property.
On a recent trip to America I heard an advert discussing weight loss and the cure to the epidemic sweeping the country. That epidemic believe it or not is obesity; I mean we all know the Americans are fond of their super size meals, but to regard something like obesity as an epidemic sounds ridiculous. In the future will this generation of Americans look back and say 'Do you remember 2012, when we really suffered with that obesity epidemic?' Probably not, but it certainly got me thinking about underlying problems within any given country or economy and how they are dealt with, or at least brought to everyone attention.
I wouldn't describe the UK housing market, or any part of it as suffering from any sort of epidemic at the moment, but unless some changes are made and we consider sustainability we could find ourselves in real trouble. We all know that rents are on the up, of course specifically in London short term lets are through the roof due to the Olympic games, but in truth rental prices across the board have been steadily rising for the last 12 months. Findaproperty recently released data confirming these price increases, specifically smaller properties, with studios up by 7% and one bedroom flats up by 2.5%.
There is a clear pattern emerging, rents are on the up because of a number of factors. The first and perhaps most important reason is the difficulty first time buyers are having purchasing. Larger deposits are now required, saving has become more difficult as the cost of living increases, mortgages are harder to come by and less properties appear to be finding their way to the sales market. Vendors would rather hold on to their properties to try and sell for high prices experienced in the 2007 boom period, but will that happen? and if so, when? This all means first time buyers are dwindling and reverting to renting, putting huge pressure on the rental market, specifically the smaller size properties that the typical first time buyer would be considering. This increased demand for the smaller properties has a knock on affect to the rest of the market. For instance if you are looking for a studio but simply cannot find one within your budget, the next logical step is to consider a larger property with a roommate to reduce costs. A viable option, a larger property for the same price as you were going to pay for the studio, but as you and a friend take that nice two bedroom apartment you liked, the tenants that were considering two beds are now in a dilemma, there aren't enough properties for them! They bring in a third tenant and you can see how it works, almost every property in the rental market becomes affected by the first time buyers that have to now rent.
Another factor to consider is that a lot of tenants already renting properties read articles just like this one, they consider moving but are put off by the difficulty they will experience finding a new property so renew where they currently are. Once again, this removes properties from a market that desperately needs them and puts further strain on the current system.
In the long term, the UK certainly shows signs of moving towards a European housing model, where properties are rented on long term leases. This would mean an entire shift from the traditional belief that you should own your home. The scary side to this argument is that it could also lead to a severe market crash should it actually happen. Consider how much your property is worth if nobody is interested in buying it anymore and the only option to be considered is how long a lease to sign.
Scaremongering aside, we need to consider viable options for the entire housing market. At the moment rents are on the up, the demand is there and the supply is stuttering. Landlords are purchasing again and helping to get the rental market where it needs to be, the smart investors are purchasing smaller size properties and making them available to tenants ASAP. The really smart investors are even talking to Thorgills first for the right advice and then using us to find the best tenants the market has to offer.
If you are a landlord with a property available in the near future it's time to speak to an expert about what sort of return you should be getting from your investment. Lots of landlords don't realise the market has moved on and as a landlord taking the risk of purchasing and renting your property, you should be pushing to get the best return on investment possible. At Thorgills we are experiencing unbelievable levels of new business with applicant registrations up, company lets up, short term lets up and of course rental prices up. May was Thorgills busiest month on record, a sign that we are entering what is likely to be the biggest summer the rental market has ever experienced.
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.