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UK Property Investors Review 2007

As another year closes and we slip, full of optimism and renewed vigour, into 2008, what does the future hold for the buy to let market in London?

Here at Benham and Reeves Lettings we're busier than ever - up by 25%, in fact, on last year's figures - plus we're finding that tenants are tending to stay put for longer, with our figures suggesting a renewal increase from 66% in 2006 to 71% in 2007.

Beaufort Park

Looking back at the year as a whole, we can see that there was an increase in the number of landlords selling their properties, but it never really amounted to anything significant, and now only those who have to sell are doing so as the volume of buyers has taken a sharp drop. What this means for long term investors, who form the bulk of our landlords, is that they are rubbing their hands together with glee, as rents rise yet again because of a shortage of rental property in the capital.

The Royal Institution of Chartered Surveyors' latest quarterly rentals survey, which is the most objective assessment of the lettings market, is reassuringly upbeat. It reports that the continued increase in rental growth has picked up at the fastest pace in the survey's history.

Because of this renewed optimism in the lettings market, and the recent Northern Rock debacle, people are recognising that good old fashioned bricks and mortar might be the safest bet after all. Investing in property is more flexible than leaving your hard earned cash in the bank - you can let it out, live in it or borrow against it and, while there may be peeks and troughs in the market, overall the long terms prospects are good. In fact, since the 1950s, the UK property market has been an excellent proposition, as prices have roughly doubled every eight years, with even more compelling figures here in London.

A Window of Opportunity

Despite further interest rate cuts predicted over the coming months, there is little doubt that the UK property market is due for a period of readjustment, with drops of up to 10% anticipated in some areas of the country. London, however, still appears to be on the up, but if prices do, as predicted, come down here then there could be rich pickings for the canny investor during 2008. There is already evidence of forced sales significantly below market value as landlords and homeowners, who have overstretched themselves, panic sell. So, 2008, far from being a time for consolidation, could present an opportunity for shrewd investment. Indeed, in the past, those who purchased wisely during the hard times reaped the rewards during the good times, ultimately becoming the property barons of the future.

London Developments with Investor Appeal

The Knightsbridge Foyer

If you do decide to make the leap and invest in a buy to let, what sort of property should you look to purchase? Here again, perhaps the past will dictate the future. Looking back at 2007 as a whole, there were two distinct types of landlord behaviour. For example, whilst some landlords with converted properties were, perhaps, more inclined to sell, landlords with new builds seem to have been more intent on retaining and even adding to their investments. The reasons for this variation in landlord behaviour is less obvious, but one certainty is that investment in London property will continue unabated. Perhaps this is because people recognise that historically a softening residential sales market normally points towards a booming rental market. Our landlords have been busily snapping up property in London developments like 'Beaufort Park', St George's new 25 acre development in Hendon where 2800 units are being built. There is also a lot of interest from investors in developments such as 'Imperial Wharf' where, out of the 500 apartments that have been built so far, we've already rented out over 200 units.

The top end of the market appears to be just as busy: in 'The Knightsbridge', a ritzy development just round the corner from Harrods, a client recently purchased a onebedroom apartment for just under £2m which we rented out less than 48hrs after completion.

This has been a particularly successful development for us; we've rented 30 units from one-bedroom apartments at £1,500 per week up to a four-bedroom apartment overlooking Hyde Park at £6,500 per week. The success here, and at other developments throughout the capital, demonstrates that tenants are still willing to pay high prices if a property is in the right location.

The new West Hampstead office goes from strength to strength

Despite being established only three months ago, our new West Hampstead office, our ninth branch within the capital, continues to be as busy as ever, with properties letting almost as soon as they come on the market. As an indication of the buoyant UK lettings market, we let out an apartment within six hours of the new office opening.

The property, a one bedroom flat in Gascony Avenue, ticked all the right boxes for potential tenants, as it was newly decorated in neutral tones with contemporary furnishings. And, importantly for the professional market, it was well connected, being just a few minutes from West Hampstead tube station, shops and cafes.

In:Style Direct makeover leads to 60% rent increase for London apartment

It's not unusual to see healthy rent increases once the team at In:Style Direct completes a refurbishment or furnishing project, but one recent apartment makeover defied all expectations for one lucky London landlord.

Within a couple of weeks, In:Style Direct took a tired apartment with excellent potential in one of London's premier locations in Knightsbridge, and turned it into something rather special - with a staggering 60% rent increase.

Out went the dated bathroom and kitchen, and the chintz curtains that were all the rage a few years ago, and in went the new. The landlord, who had lived in the flat herself prior to letting it through Benham and Reeves Lettings, was delighted with the end result, the increase in value and the staggering rental increase."

"It's now achieving the market rent for a property of this calibre," explains Nick Hubbard, Senior Negotiator at the Knightsbridge office. "With the new bathroom, kitchen and stylish decor, it took the apartment up to another level and hence a more substantial rent."

Barely had the designers completed the finishing touches than the apartment was snapped up by the first eager tenant - a professional who signed a two year agreement.

If you have a rental property that would benefit from some modernisation or just a quick makeover, then contact In:Style Direct on 020 8964 1966, email info@instyledirect.co.uk or visit www.instyledirect.co.uk

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What to look for in your first investment property

So you have decided to take the plunge and buy your first investment property, or maybe you're looking to add another property to your existing portfolio. That's the easy bit, now comes the tricky part. What type of property should you buy? Should it be a bijoux studio, a majestic penthouse or a comfortable family home? Marc von Grundherr, Lettings Director at Benham and Reeves Lettings, provides some sound advice for anyone thinking of investing in 2008.

Location, location, location

It's old advice, maybe even a cliché, but still the most important consideration when you're thinking about buying an investment property is location. Also, don't think like you, but think like a potential tenant. What's your market? If it's the professional market then you need to think like one of them. Your idea of domestic bliss could be a leafy middle class suburb, in a large detached house - quiet, sedate but absolute hell for a young professional tenant. They want to be 'where it's at' and near to public transport, as most don't have a car. They also want shops and those trendy little coffee shops that spill out on the pavement in the summer. Nor do they crave cosy evenings at home in front of the TV, but crave cosmopolitan restaurants - places where they can spend their hard earned cash after a long day at the office. So, think like tenants when you're buying, and leave your personal preferences on the doormat.

Property with 'investment potential'

These are to be avoided like the plague, especially if you hear the dreaded words from a sales agent. To them a landlord is a wonderful invention - someone who they can cast off their latest nightmare instruction to - a property that simply won't sell.

What's hot and what's not

The rules rarely change here; don't go for fads. We all love plasma TVs, but does a landlord have to provide one? No. Tenants will rarely turn these types of gadgets down but neither will they pay more for them and, if they go wrong, it's the landlord who is responsible and who will have to pick up the bill.

Instead, go for solid decent locations and property which will appeal to the widest range of tenants. If possible, try and buy something near public transport, with a lift if it's above the first floor and with an equal number of bathrooms to bedrooms. And, if it's not in good condition, give it a decent makeover before letting - you won't regret it and it will be sure to draw in a plentiful supply of tenants. Also, give security a high priority as this is also important to potential tenants.

And most importantly ...

Perhaps the best advice you'll get will be from an agent who only does lettings. Who better than Benham and Reeves Lettings? We don't do anything except let and manage property, so you can be sure that you'll receive accurate, unbiased advice. It's in our interest too for you to buy something which we can let quickly at the highest rent and for the longest term. We know what's in demand both in terms of property and location, so that you can avoid making any costly mistakes. After all, we're the largest dedicated lettings agent in London with offices in Hong Kong, Singapore and Malaysia to guide our overseas investors.

If you're thinking about buying an investment property, contact Marc von Grundherr for an honest, impartial view on 020 7938 3522 or marc@brlets.co.uk

Let's Talk Figures

Unusually there was some good news for landlords in the last budget report and now, thanks to Alistair Darling, taper relief on Capital Gains Tax will be scrapped from April 2008 and replaced by a flat rate of 18% on all capital gains. In the past, landlords have had to pay as much as 40% of the profits to the taxman if they sold their investment property. Taper relief meant that it could fall to 24% for a higher rate tax payer) or 12% for those paying tax at the basic rate, but only if you kept the property for 10 years or more. As most property investors are higher rate tax payers the new CGT changes are great news and could mean that they can enjoy tax savings of between 6% - 22% of the gain (depending on the length of time the asset has been held).

Ever thought about investing in Emerging Markets?

Tim Murphy

In recent times a number of clients with London properties have asked us about diversifying their portfolio and investing in property outside the UK.

With this in mind we have asked Tim Murphy, Managing director who founded i-Property Global in London to explain how his company operates. Basically they make property investment in capital and commercial cities in emerging and recovering markets possible.

"i-Property Global are the UK sister company of Intellectual Property based in Hong Kong and we aim to provide interesting investment property opportunities along with a service which supports each investor through the purchase and ownership of their property"

Before the launch of each new project, we ensure we have thoroughly researched and analysed the market and have negotiated the most favourable terms on behalf of investors. i-PG does not act as an agent simply selling property in return for a commission, we contract with a developer for the required number of units and achieve a bulk purchase discount part of which we always endeavour to pass on to our clients. i-PG clients therefore enjoy the benefits of economies of scale resulting in discounted prices and preferred terms. i-PG's prices and terms remain fixed for the duration of a project, even after the developer raises prices. This ensures that at whatever time you invest all clients have benefited from the same terms and conditions.

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Investors Review 2005

Investors Review 2006

Investors Review 2008