Intro 0:01
Welcome to the London Property podcast, your go to source for navigating the complex and ever changing London real estate market. Our digital marketplace provides informative and educational content from industry leaders. Through podcasts and videos. We cover various aspects of the real estate experience, including buying and selling finance, law, tax construction, design, and more. Join us as we delve into the latest trends and developments in the market and gain valuable insights from our panel of experts.

Farnaz Fazaipour 0:35
Hello, and welcome back to London Property, home of super prime. We’re doing our market research video today. And we’re welcoming back to the show Tom Bill who’s head of UK residential research.

Tom Bill 0:46
Hi!

Farnaz Fazaipour 0:47
And Marcus Dixon, who is the director of UK residential research at JLL.

Marcus Dixon 0:54
Great to be here.

Farnaz Fazaipour 0:55
And thank you to Liam Monaghan, for hosting us here at the LCP headquarters. And looking forward to sharing some insight with us. I’m going to move straight on to the second part of discussion, which is, you know, as I said, what I like to call the rental dilemma, it seems that all headlines are, I mean, we’ve all been waiting for this to happen, because obviously, we know the tax changes were introduced back in 2000, they actually came into happening, but they were announced, you know, I don’t know what it was 5-6-7 years before that. But basically, what is happening is that people are like, sort of individual landlords are leaving the market being forced to leave the market. There is a shortage of rental stock prices are going up, you know, what’s going to happen? I mean, I understand that, you know, when you’re going into different zones, people have the ability to build to rent. But what what is going to happen in prime central London, you know, once you’ve run out of the biggest states, portfolios, what’s it what’s going to be the solution?

Marcus Dixon 2:03
I mean, I guess that one of the challenges that we have is that landlords have always left the market, there’s always been reasons why landlords have sold property. But the challenge that we have at the moment is that there’s not necessarily the volume of new landlords coming into the market to replace those that are leaving, which, you know, historically is what generally happened has been a bit of a churn, but we’ve seen new buy to let landlords coming in, obviously, in terms of tax, the, it’s, it’s more difficult to make a central London rental investment stack up, particularly compared to other asset classes that we’re seeing at the moment. And so, you know, we’ve definitely seen few, a few new landlords coming through the heart of the challenge as well is that, you know, the rental market is settling back in terms of where demand is coming from. And what we saw is, you know, lots of people left London when they didn’t need to work in London, nothing was open. So all the reasons to be in London, you know, for the, for the shops, the restaurants, the theatres, the social life, that wasn’t there, they’ve started to come back. And there was a mismatch between the supply and demand in terms of what was available. But what we definitely saw was that people who were already renting in London just stayed put. So we saw the percentage of properties that we were renewing, on a monthly basis go up to above 50% of all of our let’s, that started to fall back. So there’s a little bit more balance in the market now. So we’re seeing about sort of about a third of our of our deals that we’re doing now, at JLL. Are our renewals, the rest being new lets, but there’s definitely a real challenge. And I think that, you know, Build to Rent is part of that solution. You know, nationally, this is not just a central London problem, this is happening across the board. But actually Build to Rent is only a very small proportion of the market, and there’s no way that it can kind of it can scale quickly enough. So I think it is going to be an ongoing challenge in your in our forecasts for rents reflect that we expect that rents will will outpace prices over the next five years, because there is this lack of supply, I think there’ll become a little bit more of a balance, particularly possibly with with some people who who struggle to sell maybe smaller flats in central London, we’ll look to the rental market instead, particularly as rents are rising, but it is something that is is going to be an issue, I think certainly in the sort of short to medium term.

Farnaz Fazaipour 4:16
And what about you, what do you think Liam?

Liam Monaghan 4:18
I mean, the, the rental market does need a bit more regulation. I mean, there there is obviously room for improvement, but however, isolating the private or individual accidental landlord isn’t going to help a first time buyer get onto the ladder and I think the whole idea of it is only going to slightly make the situation worse, it’s going to reduce the amount of suppliers as Marcus said, If landlords look to leave the market, which will always happen naturally, it’s it’s convincing people to come back in and take those properties can be quite challenging, but that can always be dealt with by having good management or making sure properties will look after looked after, by buying properties and refurbishing them and bring them up, bring them up to quality that a renter will like and like to stay with and you won’t have as many issues going forward. So I do feel there are improvements to be made. And providing you’ve got a good property manager or legitimate company to look after those, it shouldn’t be too hard to manage. Obviously, things looming over the over the horizon with the with the EPCs. And that type of thing, having to bring it up to a see, once again can be managed prime central London will have its challenges with a lot of heritage and conservation areas, changing windows, it all depends to see how that transpires in terms of what the government wanting to do with that. But the abolishing of section 21s and all these types of things can be managed providing that the government have proper fail safes whereby you can still gain possession back of a property, if there is stuff like rent arrears or damage goes to the property, etc. So there needs to be more conversation and more consultation about what’s going to happen, because at the moment, it’s slightly vague about when this rental reform bill will come in. And we’re always available to have discussions about how that will be going forward.

Farnaz Fazaipour 6:10
Yeah, well, that clearly discussion is, is not happening at all, because there was something in the paper just last week about rent freezes and eviction freezes. It’s like, okay, well, that’s great. But if people can’t pay their mortgages, they can’t actually hold the property via rent freeze and eviction freeze in. So that’s where I’m, you know, the build-to-rent sector. Yes, it’s great. And it’s going to provide housing, but it’s not going to provide housing in prime central London. So where are all these people gonna go?

Tom Bill 6:39
I think it’s gonna be a frustrating time for tenants. So I don’t think it was supposed to happen this way. I think the rent that the sales market was supposed to call down more accidental landlords were supposed to come across and they’d be more stock, not really happening. So I think this is stock is going to be lower for longer in PCL, and across London. The frustration that tenants have experienced over the last two years is going to be prolonged. And as you alluded to, there’s a whole political dimension to the whole rental argument and the government using it to sort of make political points and they won’t just be the government is obviously coming over their rise in a general election. What’s labour policy on things like rent freezes, people are or rent caps, people are starting to think now around what could happen. And I think everyone probably just needs to be pragmatic and understand that yes, if more and more landlords leave the sector, due to what’s happened around tax or what might be coming down the line and section 21, etc, then rents are still going to be going up and up and up, which you know, the government doesn’t ultimately want. So, the government needs to understand I suppose what makes the market take it needs to make sure landlords are attracted to come into the sector. And that complete imbalance that we’ve had between supply and demand is, is redressed to some extent, otherwise, it’s going to be just a frustrating time, they’ll come a point people will just refuse to pay rent, because they just rise too high, but doesn’t feel like we’re getting particularly close to that at the moment.

Farnaz Fazaipour 8:06
Well, I mean, one of the things that, you know, for me, I don’t know, I just feel like a crisis is create being created in in the rental market, but maybe, you know, if mortgage products improve, so that the individual landlords can actually afford to hold on, because, you know, a lot of people are going to be in negative situations still paying tax.

Tom Bill 8:27
Yeah, I mean, the mortgage, the mortgage rates and mortgage rates, I suppose

Farnaz Fazaipour 8:30
I’m talking more like products, you know, if they say, Okay, well, you know, you can put down less percentage or you can have, you know, some, you know, they need to address something because otherwise, with all the best will in the world, if you can’t hold on to your property, you can’t freeze the rent or freeze eviction will be taken by the bank. So, you know, unless they force everybody to move out of prime central London, which, you know, I guess might be a better lifestyle, but

Liam Monaghan 8:55
I guess, in prime central London, we’ve got a number of landlords will not have leverage on property. I think it’s I think of our of our new inquiries for buying I think only 75% of people are cash buyers. And the remainder had very small mortgages that just looking for for tax purposes, this will be a wider UK issue and outside of London issue whereby interest rates will affect landlords and the products that they hold, I think within prime central London and London probably more as a whole will be less of an issue as sort of people have been able to hold on to property and if they’re unable to sell it in the sales market and then look to put it on the on the rental market.

Farnaz Fazaipour 9:34
So it’d be moving more towards a kind of medium long-term investor and getting rid of the accidentals and getting rid of the sort of more short term players I guess.

Tom Bill 9:47
Accidentals landlords will still be needed but you’ll still need to have that kind of fluidity and I’m you know I’m sure a lot of lettings agents are waiting for the sales market to to cool down and get more stock on. I think there needs to be that. That sort of movement across, but if the government’s treated it is had a highly political dimension to it, and it hasn’t really worked. What governments tried to do in the headlines is the same with how many houses it wants to build. The government doesn’t build houses now. So builders do, there’s, there’s a sort of, it kind of gets in the way. The results are frequently not that those that are are actually desired.

Farnaz Fazaipour 10:26
Okay, well, thank you very much for all of you to come talk to us again, and we look forward to catching up with you soon in the next episodes. Thanks a lot.

Outro 10:37
Thanks for tuning into our latest episode of the London property podcast. Head over to our website where you can browse our exclusive network of top experts driving the market. As a member, you’ll have direct access to our experts and their networks. Our award winning content will help you choose the right professionals for your needs, and make informed decisions about your investments. personal recommendations are a powerful tool in connecting with trusted professionals. Let us introduce you to the right people to help you achieve your real estate goals. Contact us now to learn more about becoming a member and gaining access to these valuable resources or joining our directory of experts.