The Property Rental Crisis as Landlord’s abandon the market

The UK is facing a rental crisis, with one of the main causes being the tax crackdown on private landlords. Since April 2017, landlords have been unable to deduct all of their mortgage interest costs when calculating their profits. This has made it challenging for them to cover their expenses through rent, causing up to 44% of landlords to exit the buy-to-let market, according to a recent survey by Finbri Mortgage consultants. Zoopla also reports that in Q1 of 2023, 26% of properties put up for sale were previously rental stock that landlords could no longer afford to hold. Other factors such as regulations, higher maintenance and borrowing costs, and low yields in central London have compounded the problem.

The rental property shortage has resulted in increased rents. A USwitch survey of 2,000 renters found that prices would have to fall between 11% and 20% for buyers to be able to afford to buy. Additionally, landlords have had to increase rents to meet lenders’ stress test criteria for re-mortgaging, which is making it more difficult for people to afford to rent.

More people are finding it hard to buy a home, leading to an increase in demand for rental properties. This creates a vicious cycle where people are forced to rent because they cannot afford to buy, driving up demand and rents. According to the same USwitch survey, wealthier renters with better referencing and track records have an advantage in securing the limited stock of rental properties. In conclusion, the rental crisis in the UK is a complex issue that requires careful attention to address. The government may need to introduce new regulations and provide support to landlords to stabilise the rental market and protect tenants.

The new normal of flexible working is having an impact on property

As hybrid working becomes the new norm, Londoners are rethinking their property requirements. With more people opting to work remotely, the need for a traditional office space is decreasing, and this shift is affecting the types of properties that people are seeking.
Those who have moved out of the city and into the countryside are now looking for London pied-à-terres to reduce their commuting time. They crave the energy and vibrancy of city living to counterbalance the tranquillity of rural life. As cycling and walking become more prevalent in the city, proximity to transportation is becoming less important. Instead, buyers are placing greater emphasis on peaceful and quiet locations, given the amount of time they’re now spending at home.
Furthermore, buyers are now looking for turnkey properties, as extensive renovations can be costly and disruptive. With an increasing number of people conducting work calls via Zoom, properties located near noisy schools or busy roads are becoming less desirable. This, in turn, is limiting the availability of slots for viewing occupied properties.
For full-time Londoners, who seek a compromise between city and country living, locations such as Wimbledon and Hampstead are becoming increasingly popular. With hybrid working changing the landscape of traditional office life, it is clear that the property market is also evolving to reflect this new reality.

Guerlain Spa at The OWO

The OWO residences and Raffles hotel, located in the heart of Whitehall, have revealed their latest project – an exclusive partnership with Guerlain Spa and Pillar Wellbeing. Come summer, the luxurious destination spa and health club will become home to the only Guerlain Spa in the UK, offering a holistic approach to beauty and wellness, alongside cutting-edge training and nutrition from Pillar Wellbeing.
The Raffles London at The OWO is the epitome of modern indulgence, blending the best of contemporary pleasures with the rich heritage of its listed building. With a storied past that includes being graced by the likes of Winston Churchill and Ian Fleming, this elegant residence overlooks St James’s Park and offers a unique living experience. The development’s exceptional combination of amenities and the unparalleled Raffles hotel experience create a complete lifestyle package, making it the perfect venue for personal, business, and even state occasions.

Boom in Super Prime New Builds

According to new research by Tylburn, a boutique real estate agency specialising in London’s super prime market, there has been a significant increase in sales of new super prime developments in 2022. High net worth buyers are shifting their focus to new builds and are willing to pay a premium of up to 30% to secure properties in the best-in-class developments that offer discretion, security, and a full lifestyle service.

Located in London’s most exclusive postcodes, these new developments are in high demand, particularly among Middle Eastern and North American buyers. There are currently less than 20 high-end developments in Prime Central London with availability in the £5 million-plus bracket, including Chelsea Barracks, Southbank Place, 1 Grosvenor Square, The OWO, and The Whiteley, among others.

The scarcity of available stock and the increasing number of international off-plan sales have created a highly competitive market for these properties. However, despite the premium prices, buyers still see the value in investing in new builds, as it saves them time and money that would otherwise be spent on updating a non-new-build home to a comparable standard.

Moreover, the discretion and security offered by new-build developments are highly valued by UHNW buyers and are a significant driving factor in their purchasing decisions. According to Tylburn’s report, 70% of the £793 million worth of property sales over £5 million in Mayfair in 2022 were from new-build sales, and this percentage increased to 80% when looking at sales over £10 million.

Overall, the demand for super prime new builds is on the rise, and Tylburn’s research indicates that this trend is likely to continue.

Is It the death of the Buy to Let market?

A London based broker predicted the death of the buy to let market earlier this month as quoted in the Telegraph. The Buy to let market is about to enter its 30th year and its demise has been predicted over the last 20 years according to Richard Rowntree , the managing director of Paragon Bank.The challenges that are currently being faced are by individual, accidental landlords and those that the government wants to exit the market. For professional landlords whose livelihood is providing rental property there is an opportunity to acquire more stock. Holding property in company names and injecting more equity into their portfolios turns this crisis into an opportunity. Professional landlords are making it work and adapting.
UK Finance data recently showed that the BTL lending had hit a record level in 2022. Product rates are coming down and landlords are favouring longer term fixed rate products again instead of the variable deals.

The Buy to let market has survived the dotcom bubble burst, the Iraq War, the global financial crisis , Brexit, stamp duty surcharge, tighter regulation and covid. The sector adapts , evolves & grows. For investors that are looking to the medium/longterm its an asset class that works.

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