Buy-to-Let isn’t dead, it simply requires a more strategic focus

Despite the doom and gloom predictions that the buy-to-let sector in London is in a famine, the latest research from Benham & Reeves Residential Lettings has revealed that rental levels have remained largely static across most London postcodes and some surprising rental hotspots have emerged.

There’s no denying that it has been a turbulent year for the private rental sector with the introduction of stringent buy-to-let mortgage lending criteria and phasing out of mortgage tax relief that has squeezed yields. These unprecedented interventions have left investors worried and there have been fewer rental properties coming onto the market, this supply crunch is exerting an upward pressure on rents. Rising inflation continues to outstrip wage growth denying first time buyers the opportunity to get onto the property ladder, so the demand for rental accommodation continues to remain robust. In fact, rental growth is expected to outpace property price rises this year and Benham & Reeves lettings are seeing letting transactions up by 12.7% compared to the same period last year.

Investors now need to be more strategic, investing in localised hotspots that have proved to be attractive to renters. According to our research, the Battersea and Nine Elms postcodes have witnessed a 17% jump in demand by applicants over the last quarter of 2016- quite extraordinary for their Zone 1 location, making a compelling argument for investors seeking long-term value south of the river. There have been pockets of remarkable rental growth here with the launch of several high profile new property developments including the re-development of the iconic Battersea Power Station.

Other consistent performers with over 3% rental growth include Paddington, set to further benefit from Crossrail, and Hammersmith that has continued to attract corporate professionals owing to its strategic West London riverside location. Expectedly, some of London’s priciest postcodes have been witnessing declining rents from unsustainable highs a few years ago – from a tenant’s perspective it has never been a better time to rent in prime central London.

Londoners are increasingly seeking apartments defined as ‘affordable luxury’. Buy to let hotspots continue to focus on lifestyle amenities and accessibly of transport links. Prime residential developments are offering residents lifestyle amenities that wouldn’t feel out of place at a five star hotel. The much anticipated London Dock development in Wapping, the site of the former News International headquarters, offers residents a private club lounge, 20 metre swimming pool and even a virtual golf course and squash court! Transport links are also quite critical with over two thirds of our tenants unwilling to live more than ten minutes away from a transport station.

Applicants have begun to prioritise value for money as they reach an affordability threshold, we advise our landlords to expect realistic rentals to eliminate void periods. Tenants on a budget continue to push East, where there are plenty of high quality developments that benefit from good transport links at affordable rents.

“Predictions that a flood of landlords will abandon their buy to let portfolios have been greatly exaggerated, in fact we have seen very few clients exit the rental market this year – in fact most are actively looking to invest further. Property continues to remain a very stable investment in light of stock market volatility and historically low interest rates,” says Lettings Director, Marc von Grundherr, “The fundamentals continue to remain strong and that is why our outlook on London property continues to be bullish. Professional investors have been able to navigate these legislation changes and capitalise on these localised rental hotspots.”