London stands out as the sole region in the UK where tenant demand has contracted over the past three months, according to the Royal Institution of Chartered Surveyors (RICS) UK Residential Survey.

While the nationwide rental market is grappling with high tenant demand, London faces an increase in people unable to afford rent. Affordability issues have led tenants to resist paying record rents, causing a dip in demand. The situation has prompted concerns about potential homelessness, with a report suggesting 60,000 people in London could be homeless by 2030 due to unaffordable prices. Despite this, Zoopla notes a persistent cycle of low supply and strong demand in the London rental market, keeping rental growth in double digits. However, the overall UK rental market is grappling with a decrease in properties as landlords exit the market due to tightening rules and high mortgage rates. Rental prices are expected to continue increasing, with the RICS survey forecasting a 4% rise in rental prices across the country in the next 12 months.

Despite challenges in the sales market, demand in the overall UK rental market is anticipated to keep growing. The future of London’s rental market is expected to be influenced by financial pressures, regulatory reforms, and the alignment of tenants’ and landlords’ expectations

If you are a buy to let landlord and want to talk about your options and help navigate the market conditions, email us at ask@londonproperty.co.uk we would love to help you connect with the right experts and make informed decisions.

In response to the scarcity of space in prime central London, a noteworthy trend has emerged among developers.

They are increasingly transforming former executive boardrooms, department stores, and civil servants’ offices into high-end apartments and luxury hotels. Despite the inherent challenges and higher costs associated with working on listed or landmarked structures, historic buildings are becoming more attractive to developers.

This transformation is not only driven by practical considerations but also by a growing demand from American clients who appreciate the history and charm that older buildings bring. Features like stained glass windows and period details add a unique appeal to these repurposed spaces. Two prominent examples of this trend are evident in 9 Millbank, once the headquarters of Imperial Chemical Industries, now offering luxury apartments, and the newly inaugurated Raffles London hotel situated in the historic Old War Office building.

The limited opportunities for large-scale development in prime central London have redirected developers’ focus towards repurposing iconic buildings with storied histories. This approach results in a harmonious blend of stately features and modern amenities. The growing preference for these refitted buildings underscores a broader trend in London’s real estate market—a heightened appreciation for the preservation and repurposing of historic structures.

UK Housing Market Downturn Spurs Consolidation Among Estate Agents

Consolidation within the UK’s housing market has surged over the past year due to higher interest rates impacting sales, creating opportunities for larger players to venture into lettings. Connells, now the largest network of estate agencies in the country with 80 local agencies following various takeovers, including the significant acquisition of Countrywide in March 2021, exemplifies this trend. CEO Richard Twigg highlights their commitment to acquiring sound businesses, leveraging the sales downturn to capitalize on potential targets with robust balance sheets.

The residential property market’s consolidation has accelerated as increased rates have pressured smaller independent agencies. Foxtons, London’s largest letting agency, echoes this pattern with its recent £10 million acquisition of Ludlow Thompson, emphasizing a strategic move into lettings amid the sales slowdown. Other notable transactions include the £10 million sale of Chestertons to Emeria and the £100 million bid by US-based CoStar for UK property portal OnTheMarket.

The housing market, following a pandemic-induced boom, has witnessed a decline in house prices due to higher interest rates affecting mortgage costs and diminishing purchases. Zoopla’s study suggests that UK house sales are on track for their slowest year since 2012, marked by a 28% year-on-year drop in mortgage-backed sales. Although recent months showed a 1.1% increase in house prices, the market remains down 3.2% compared to the previous year.

The shift towards lettings, buoyed by rising rents resulting from increased rental demand, has become a focal point for companies seeking profitability amid challenging sales conditions. Foxtons CEO Guy Gittins notes the fragmented nature of the market as an opportunity for consolidation, with the company now deriving over 70% of group revenue from lettings after the Ludlow Thompson acquisition.

Acquisitions are not merely about market share but also about gaining valuable consumer data and historical market trends. Larger agencies are leveraging enhanced data capabilities, improved software, and automation to enhance customer experiences and sector profitability. The evolving regulatory landscape in the lettings industry further underscores the advantage of scale, as compliance efforts become more manageable for larger entities compared to smaller rivals.

In summary, the current consolidation trend in the UK’s housing market, driven by challenging sales conditions and a shift towards lettings, emphasizes the strategic moves of major players like Connells and Foxtons to position themselves as industry leaders.

For Londoners facing the challenge of a substantial average deposit of £142,870, which is almost a third of the property purchase price, new schemes are emerging to assist first-time buyers in the capital.

Here are five innovative ways to achieve homeownership without a substantial deposit:

1. Deposit Unlock:
• Created to fill the void left by the end of the Help to Buy scheme.
• Enables first-time buyers to purchase a new-build property with just a 5% deposit.
• Requires buying from a participating house builder and using a mortgage from a participating lender (e.g., Newcastle Building Society, Nationwide, Accord Mortgages).
• Participating builders pay to insure mortgages against potential losses, addressing lender concerns about new-build property depreciation.
• Scheme availability is limited but has the potential for growth.

2. HomeNow:
• A start-up scheme that helps tenants become homeowners without a deposit.
• Residents find a property, and HomeNow purchases it.
• Residents pay rent to HomeNow, which acts as their landlord, but they can treat the property as their own, decorating within reason.
• After five years, the property is valued, and residents are entitled to a third of the increase in equity, which can be used as a deposit to buy the property from HomeNow.
• If the property hasn’t appreciated, the lease can be extended, with a two-year break clause.

3. Save to Buy:
• Fairview’s scheme allows first-time buyers to save for a deposit with fixed monthly payments while living in one of the developer’s new-build properties rent-free.
• Monthly payments contribute to a deposit pot.
• Buyers complete the purchase when there’s enough money for a deposit, typically taking between six months and a year (maximum two years).
• Once the deposit is saved and completion takes place, Fairview has no share in the property.
• Eligibility requires a 1% deposit, full-time employment for at least three months, and qualification by a third-party financial adviser for affordability and credit score.

4. Skipton Building Society’s 100% Mortgage:
• Skipton offers a unique 100% mortgage product, requiring tenants to demonstrate 12 months of rental payments.
• Suitable for those with a strong rental payment history but no extra savings for a deposit.
• Borrow up to £600,000, subject to affordability and credit checks.
• Limitations on property types, excluding new-build flats or recent conversions.
• Higher loan-to-value results in less competitive rates, and the maximum mortgage term is 35 years.

5. Even:
• Even and similar companies offer first-time buyers the chance to boost their deposit.
• Requires a 5% initial deposit, which can be increased with an equity loan of up to £100,000.
• When selling the property, the profit (or loss) is split based on the loan Even has provided in proportion to the deposit.
• Example: If buying a £100,000 property with a £10,000 deposit, a £10,000 Even loan, and an £80,000 mortgage, and selling for £110,000 with a £10,000 profit, Even and the buyer split this 50/50, each taking home £5,000.

In a noteworthy development, a London-based developer and a US investment firm are advancing with the construction of an additional 286 build-to-rent (BTR) flats in the capital, having secured a substantial £97 million development loan.

The collaborative effort between Argent, in joint venture with Atlanta-based investment manager Invesco Real Estate, has selected Galliford Try to execute this phase of the project at Brent Cross Town, a key component of a massive 6,700-home regeneration scheme.

The new BTR homes will encompass a mix of market rent and discount market rent, constituting an £87 million contract. As part of the broader initiative, G15 landlord L&Q is also actively participating, contributing 120 affordable homes in partnership with Related Argent and Barnet Council.

Billed as one of Europe’s largest regeneration projects, the 180-acre Brent Cross Town will not only feature residential developments but also incorporate 50 acres of parks and playing fields, along with three million square feet of offices. Additionally, a new Thameslink station, Brent Cross West, is slated to open, providing connectivity to King’s Cross.

LaSalle Investment Management has extended a substantial £97 million ‘green’ development loan to facilitate this phase of the project. Galliford Try is already underway with the first BTR element, comprising 249 homes.

Ross Houston, deputy leader and cabinet member for homes and regeneration at Barnet Council, expressed enthusiasm, stating, “Barnet’s new park town has been carefully designed to meet the needs of our residents now and in the future with a range of options including social housing, private sale homes, student accommodation, and homes built to rent.”

Invesco Real Estate joined the project in October last year, acting on behalf of an unnamed US separate account client. Related Argent, a joint venture between US firm Related Companies and London developer Argent, renowned for the successful regeneration of King’s Cross, is poised to formally merge next year.

At London Property we collaborate with leading experts driving the thriving Build to rent sector. Our experts have specialist experience in land acquisition, project management & access to funding. Email us at ask@londonproperty.co.uk to start the conversations.

A group of nearly 100 property owners has lost a preliminary hearing regarding the use of two stamp duty land tax (SDLT) schemes, known as ‘Jeepster’ and ‘Hummer,’ promoted by Cornerstone Tax Advisers.

The schemes aimed to reduce SDLT liability on residential property purchases by taking advantage of rules for sub-sales of real property. HMRC issued discovery assessments for underpaid SDLT, leading to a legal dispute. The First Tier Tribunal dismissed the appeal, stating that there had not been full disclosure of facts and the schemes were found to be ineffective. The appellants have 56 days to appeal.

Stamp Duty Land Tax (SDLT), commonly known as Stamp Duty, is a government tax imposed on property buyers in England and Northern Ireland. The tax has a rich history dating back to its origins in Venice in 1604, where it was later reintroduced by the Spanish in the 1610s. However, Stamp Duty, as we recognize it today, made its way to England on June 28, 1694, during the reign of William III and Mary II. Its introduction aimed to fund the war with France and initially applied to various documents, including cheques, property and land transactions, and receipts.

The success of Stamp Duty in increasing the crown’s treasure led to its persistence for centuries. Over time, the scope of the tax evolved, eventually resulting in the introduction of a new type of land transfer tax in 2003.