Simon Godson, a partner at W A Ellis, comments: “It has been widely reported that there is a shortage of new properties coming on to the market, and this is resulting in increased demand; I would suggest that the current stock levels will become more typical in the future, rather than there being a short-term lack of supply.
“Of course, as demand increases, so do prices. The last five deals that we have agreed were all above the guide price, with an average excess of almost £90,000 being achieved. All five deals had multiple interested parties bidding against each other. Lonres, the London property transactions archive, reported that the average sale price across London has risen by 5.8% since the beginning of the year.
“The Royal Wedding has meant that London has been in the spotlight. This, in turn, sparked a lot of interest and I expect to receive enquiries on the back of it for some time to come, but aside from this and the low levels of property stock, there are a number of other factors which are contributing to the heightened demand for properties in Prime Central London. We continue to experience high levels of interest from international buyers, particularly those from countries in the Middle East which are still suffering from political unrest. The ongoing relative weakness of Sterling has also meant that London is an attractive location for overseas buyers who are looking to invest.
“Because demand for properties to purchase is not currently being met, the rental market is particularly buoyant. This, coupled with low interest rates, means that landlords are becoming increasingly reluctant to sell, again resulting in fewer properties coming onto the sales market.”
Lucy Morton, senior partner and head of lettings at W A Ellis, adds: “The buoyant lettings market has meant that our average rent has increased by 20% since last year, and increases on renewed tenancies continue to rise.
“The demand for rental properties means that void periods are now at a two year low, with the average void period currently just 2.8 weeks, compared with 3.5 weeks in the same quarter of 2010. 45% of our landlords now experience void periods of less than two weeks and 79% of properties are empty for less than a month. I think that this trend is set to continue as good quality rental properties in Prime Central London are so rarely available.
“The strong lettings market is also resulting in an influx of higher value properties; the average value of rental properties in Central London has increased 14.8% since last year. This is also the case nationwide, with the average value increasing by 11.6%.
“As is the case on the sales market, the lettings market is in urgent need of more properties, so I welcome the news from Asstez, the property investment specialist, that the number of buy-to-let mortgages it has dealt with has doubled in the last year. However, this news is not so good for first time buyers who are struggling to secure mortgage deals – Asstez reported that buy-to-let investors tend to have 25-40% deposits, whereas first time buyers usually require a 90% loan-to-value mortgage. Higher deposits and established credit ratings are more attractive to risk-adverse lenders, which means that many would-be-buyers are continuing to rent due to strict lending criteria.”
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