The buy-to-let market has been strong for some time, but last year saw some changes to this starting to occur. So, what does 2018 have in store for the property rental market?
With many young people struggling to get on the property ladder and a short fall in new homes, London has an interesting year ahead.
Rental Growth
During 2017 there were concerns that the rental market would finally implode but it seems that prices actually remained surprisingly stable. Growth in London’s rental slowed to 0.9% in the run up to September last year, and in the 12 months leading to October it was listed as 0.8%. The rest of the country is currently out-stripping London in terms of price growth and it seems this trend is set to continue.
With stagnating wages becoming an issue, the fact that London is expected to lag behind the predicted rise of 1.5% in English rental prices is likely to be welcome news for London residents, despite the fact that their rental prices are still higher than the rest of the UK.
The length of this slowdown is a subject for debate, as some forecasts show that rents could increase by as much as 25% over the next five years.
London Regions
Whilst it is well known that prices in London sit much higher than those in the rest of the country, it is also the case that the capital itself is subject to regional variations. Prices can not only vary from borough to borough, but also from street to street in some instances. A simple five minute walk across the city can see a doubling in rental prices.
Some areas of London that were previously considered to be less desirable have now been through a process of gentrification and are now experiencing the leap in rent and house prices that comes hand in hand with this. This includes areas such as Brixton, Peckham, Shoreditch, Tooting, Streatham and Stoke Newington to name just a few. The big jumps in the cost of living in these areas has left many residents unhappy with the changes as many feel that they have been priced out of the area.
With Crossrail beginning to take effect in another year, it is likely that areas such as Acton, Ealing, Woolwich, Abbey Wood and Manor House will become popular commuter areas. This will then lead to larger price rises due to their positions on the route.
Multiple Occupancy Housing
As rental prices currently set at such a high level, there is now a growing trend towards flat-sharing not only in London, but also the rest of the UK. Once thought of as a way of living that only students would partake in, it is now spreading to young professionals and those in their 30s who are still unable or unwilling to get onto the property ladder.
This could be due to property and rental prices, but is also probable that other factors such as an increase in job turnover, a trend of marrying and starting a family later and higher divorce rates. This means that people in the middle age are also starting to enter the world of multiple occupancy housing.
Build to Rent
Companies and investment funds are now putting together large housing developments which have been specifically designed for the rental market. This model is thought to be some to be the future of city rental as well designed units are leased with basics such as Wi-Fi, bills and television included in the cost. This is likely to be attractive to tenants, and when coupled with large brands who are set to enter the market this year, this sector is only likely to grow.
Whilst there are likely to be fluctuations in the market, it seems the rental market in London is not set to disappear any time soon.
Author Bio
Hopwood House are UK property investment specialists, with a wide range of investment opportunities in the student property and buy to let investment markets.
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Daniel Peacock