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UK Property Investors Review 2006

From the desk of Anita Mehra, Managing Director, Benham and Reeves Residential Lettings (a sister company of Residential Lettings London).

London's lettings and sales markets have performed much more strongly than expected in the first half of 2006 according to analysts.

In the spring, demand from tenants escalated to well above average according to the Royal Institute of Chartered Surveyors, whose quarterly survey is one of the most authoritative in the rental sector. It reported rents rising at their fastest pace since April 2001, a situation which has stabilised in the early summer.

"The Olympics have helped to stimulate interest in London's buy-to-let market, although some of the initial boost has now calmed.
Demand from tenants is strong in much of the city" says UCB managing director Keith Astill, the specialist buy-to-let arm of Nationwide building society.

Yields have not necessarily risen however, because of the boom in capital values as the sales market has strengthened, especially in central London locations.

Annual property inflation across Greater London is now 7.1% according to government figures, while asking prices - a guide to future price inflation - are now 11.7% higher than a year ago says Rightmove, a website that monitors tens of thousands of London property prices.

Other price indices from the Halifax and Nationwide suggest that in central London areas - Kensington to Hampstead, Hyde Park to Docklands - annual inflation may be as high as 10% now while some sought-after locations have risen 20% in 12 months.

This short-term rise may not last long but its existence - in stark contrast with the volatile stock market - shows the underlying strength of property as an investment.

Much of this year's sales boom is down to the fortunes of the City of London.
Oxford Economic Forecasting says the City's financial institutions - where average annual pay is over £120,000 - will add another 12,700 to their staff by late next year. Many of these will require at least short-term rental accommodation.

Over 65% of companies listed in Fortune's Global 500, a key barometer of world financial activity, have chosen London as their European or world headquarters and the capital has more foreign banks than any other city on the planet. With the capital's economy still buoyant, property remains a solid and reliable bet.

From the Horse's Mouth

The central London rentals market is very busy at present with more applicants registering in all price brackets in the first half of 2006 compared to 2005 in total - an unprecedented jump in demand. Now is a great time to invest or freshen up your investment property to capitalise on this activity.

Marc von Grundherr, Lettings Director talks to professional landlords and gets their top tips on the Do's and Don't's of lettings.

Zeev Zimmerman, a landlord since 1984 with a portfolio of 85 properties in prime central London says that your agent should get you high calibre tenants who pay a better rental, stay for longer periods and keep your property in good condition.
His top three tips are:

1. Buy smaller units as these are always in demand.

2. Buy in a good area, near a Tube station and amenities.

3. Use a good agent, preferably one who is well established and ARLA registered.

Rosie Millard, Landlord and Author of 'A Landlady Writes' in the Sunday Times Home section says:

• DO predict your estimated rental income realistically. Use classified ads and local letting agents windows as a guide.
• DON'T use your buy to let flat as a dumping ground for old furniture. Tenants do not want to live in The Old Curiosity Shop.
• DO try and manage your flat yourself if you live nearby, you will save a great deal of cash and have a closer relationship with the whole project, but you must be warned tenants will expect you to be on the end of the phone 24/7.

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Overseas investors flock to event on "How to do well in London rentals market"

New and existing landlords came to hear advice on to how to take advantage of the great opportunities there are to make money from London's property rental market at a reception hosted by Benham and Reeves Lettings in Hong Kong and Singapore recently.

The events attracted more than 220 Chinese and expatriate investors, reflecting the renewed interest in the Far East for buying London property as an investment.

Key presentations on how to survive and do well in the current London rentals market were given by Marc von Grundherr, Lettings Director and Anita Mehra, joint Managing Director of Benham and Reeves Lettings and its sister company In-Style Direct which specialises in furnishing and the refurbishment of rental properties. Susan Hissey, Head of Management plus managers and staff from each of the Benham and Reeves Lettings local offices also represented the company offering advice on all aspects of lettings and property management.

The Singapore event was also attended by His Excellency Sir Alan Collins, British High Commissioner and other property specialists including the world's fifth largest bank, The Royal Bank of Scotland, who talked about various aspects of investment financing and the Fry Group, who are universally known as being the premier provider of expatriate tax and financial planning services, who covered every financial aspect of letting in the UK.

Heartened by the success of the event, Anita Mehra commented "We have been extremely pleased with the turnout for these events and hopefully the information we and our other guest speakers have passed on has been helpful. There has never been a better time to invest in London property, history shows us that bricks and mortar is still a sound investment as long as you remember that it should be part of a long-term plan".

Two new laws are set to change the rental industry for landlords.

Firstly, new rules arbitrating on whether deposits should be returned to tenants come into effect later this year. The Tenancy Deposit Scheme safeguards tenants against the small number of landlords who unfairly retain deposits even if no damage is caused to a property, and if all rent has been paid on time.

But it also gives landlords extra safeguards if they retain a deposit for good reason, and may therefore widen the market by encouraging owners to rent to tenants previously considered a higher risk.

Landlords may either pay the full deposit into a designated third-party scheme until the end of the tenancy, or transfer the deposit to the independent third party if there is a dispute when the tenant hands in his notice.

As founder members of ARLA, in addition to all the other benefits clients gain (including compliance with handling and accounting for clients' money; the mandatory ARLA Client Money Protection Bonding Scheme; Professional Indemnity Insurance; dealing with complaints and disciplinary procedures and the fact that in each office, at least one member of staff will hold a suitable industry qualification), Benham and Reeves Lettings will be joining a regulated scheme and as such we will continue to hold all our clients' deposits which means our clients will continue to be able to exercise more control over the deposit rather than simply paying it into the government's bank account and having to battle it out with them.

Secondly, landlords owning 'Houses in Multiple Occupation' (HMO) must now buy licences if the properties pass local authority checks on health and safety, and cleanliness.

HMOs are three-or more storey buildings occupied by five or more individuals in two or more households. If one family rents a large property, they are a single household.

Councils are free to set local licence fees - prices vary from £300 to over £1,100 - but this may affect the market. A survey by the National Landlords Association says one in six landlords owning a HMO may reduce their portfolios while 61% of all landlords say they are unlikely to buy such a property in future.

If you are concerned that your property might be a HMO and need advice, please contact Susan Hissey, Head of Management on 020 7435 6014 or manage@brlets.co.uk.

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Investors Review 2005

Investors Review 2007

Investors Review 2008