Investors Information 2005
WHERE ARE WE HEADING IN 2005
From the desk of Anita Mehra, Managing Director
2005 is expected to see a continuing gentle recovery in the central London rentals market.
Although yields are modest and have not shown sustained rises, research from the Royal Institution of Chartered Surveyors suggests some London rents increased 5% in 2004. The Association of Residential Lettings Agents says when capital growth and rental income are combined, central London landlords have enjoyed annual returns of 10% since 2000.
In 2004 Benham and Reeves Residential Lettings saw a 23% rise in tenant enquiries, 67% success rate on tenant renewals and a 14% rise in instructions to manage property.
London remains an enduring investment market. Analysts including the Nationwide building society predict modest capital appreciation and increasing rental yields during the coming year. The market will also be helped by legal changes that have created new Property Investment Funds, which will lead to more rental properties being bought especially by institutions.
The PIFs are tax-efficient trusts announced by the government in 2004. They will bring the UK into line with the US, Japan and France, which have long had residential investments of this kind. They are likely to come into effect in early 2006, coincidentally at the same time as high-value buyers will be able to purchase investment properties for inclusion in their SIPPs pensions.
As individual landlords and investment funds vie for property, so capital values are expected to rise and while this is happening rental demand is also set to stay strong.
Frustrated first time buyers have no choice but to rent, with research from buy-to-let lender Paragon Mortgages suggesting three quarters of 18 to 24 year olds say they expect to rent when leaving home; just 19% of 18 to 24s now buy their own place immediately on leaving home. Only 60% of 30 year olds are home owners today, down from 68% two years ago.
Professional corporate tenants are also increasing in number, although still below the levels reached before September 2001 and continuing to prefer small units.
But while the market has potential, landlords must remain shrewd. Competition is fierce - institutions spend high sums on refurbishment before letting, there are surpluses of two and three bedroom apartments, and tenants increasingly compare conditions and prices. In other words, if landlords do not refurbish they may not get the income and tenants they want.
Benham and Reeves Residential Lettings can help. We opened our eighth central London office in Swiss Cottage and have enlarged our accounts and management units which now occupy new premises as part of a bid to improve service to clients. We also opened a Kuala Lumpur office to complement existing bases in Hong Kong and Singapore.
We can advise on all aspects of property management and letting and can work with you for our joint objective: to let your property.
News for landlords on how to make the most of their properties to let
The sales market in 2005 is likely to see very low growth but will avoid a crash.
Average UK house prices finished 2004 10% up on a year earlier but this masked regional variations - there were 5% rises in Greater London but 25% in northern England and Wales. Analysts say no area will see big rises in 2005 but this time London and the south east will perform better.
Alex Bannister, chief economist of the Nationwide building society, says prices in London and southern England are now more affordable when compared with local wages and investment, than those in Wales and the north, where the ratio of prices to income looks stretched.
"Those regions that have seen prices rising fastest in 2004 will see the sharpest slowdown" he warns.
One other key indicator will be the turnover on homes bought and sold.
Data from the Land Registry, which records every property sale, shows that in 1995 about 2m homes a year changed hands in the UK; in 2003 that was 1.4m and 2004 ended with about 1.3m. The Nationwide predicts another fall of up to 15% in 2005 because of fewer first time buyers being able to afford a home.
This may point to a very quiet sales market - but will indirectly create stronger rental conditions.
CHANGING ROOMS FOR CHANGING TRENDS
Our aim is to get long term tenants providing continuity of income over many years. Landlords have to realise that following a long letting, even though major works are covered by a schedule of dilapidation paid from the tenant's deposit, styles have moved on and more than basic reinstatement is required to attract a high quality tenant as in the interim, standards and expectations have shot ahead.
This was exemplified in a recent long term letting that came to an end, where the landlord expected the same rent without some updating of the property. Six months later (without income) our advice was followed. After refurbishment of all five bathrooms plus new decor and curtains, the property let immediately at full asking rental. The moral of this story is invest in your investment and it will look after you.
EXCELLENT RESPONSE TO OVERSEAS INVESTORS EVENTS
New and existing landlords came to obtain guidance on how to do well in the current London rentals market during a recent visit by Anita Mehra, Managing Director of Benham and Reeves Residential Lettings to their overseas offices in Hong Kong, Singapore and Kuala Lumpur.Sue Hissey, Head of Management plus managers and staff from each of the local offices also represented the company offering advice on all aspects of lettings and property management. The events exceeded all expectations, with many would-be investors taking full advantage of the professional advice on offer. Anita Mehra commented, "we have been extremely pleased with the turnout for these events and hopefully, have passed on some valuable information to anyone wanting to buy a property to let for investment purposes. It is also nice to catch up with existing Landlords".
Lynne Geeves, manager at the firm's Singapore office, also reported a 30% increase in property instructions during 2004, "it is essential that Landlords get good advice about what's really happening to the market in London. Knowing that we are on-the-spot to help is a great advantage to them".
A FRESH START FOR KENSINGTON LANDLORD
This smart apartment is just one of three flats furnished and let by Benham and Reeves Residential lettings at Kensington Westside, a recent landmark building situated near the High Street. The owner had all but given up on ever being able to hang to his investment properties.
"Benham and Reeves literally saved me a fortune," comments Mr Vanderpuije, the owner. "I had been spending increasing periods of time overseas and had left the properties on the back burner so to speak which meant that they were sitting there costing me a fortune in interest and service charges, with no income to offset the costs. I own a couple of two bed flats and one large three bed unit and to be honest I hadn't done anything with them, not even put down carpets since I bought them eighteen months ago. I am a complete novice to letting and didn't know where to start, but B&R immediately jumped to my rescue. They arranged for wood floors and carpets to be laid within a few days and for curtains and blinds to be installed within a week. How amazing! At the same time, they gave me examples of furnishings they recommended and I followed their advice. All 3 flats were fully furnished and let within 10 days. I can only say what a pleasurable experience this has been and I now have income producing units managed by B&R so I don't have to worry about them as I know my interests are being so well looked after."
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Investors Information 2005
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