The summer months have seen the usual frenetic activity in the local lettings market. The demand this year was as buoyant as ever assisted by the unusually higher stock levels not encountered in previous summer months.
We were also helped by a slowing sales market which shifted demand into the Private Rental Sector (PRS), as potential buyers defer a decision to purchase and instead choose to rent. If the lending market tightens over the medium term, this will also drive more demand into the PRS, particularly among those younger households reliant on higher loan to value or loan to income mortgages.
As we go forward into 2017, we expect the less favourable tax environment and the prospect of increased mortgage regulation in the buy-to-let sector to make investors more cautious about expanding their portfolios; especially given the underlying sense of caution in light of the vote to leave the EU. However, in the short term at least, we expect to see this offset by an increase in accidental landlords as buyers choose to sit out of the sales market until greater certainty prevails, though to a much lesser extent than seen in 2008.
This would suggest continued upward pressure on rents. However, this is likely to be tempered by rental affordability that is expected to be constrained by reduced wage growth (which itself results from a weaker economic outlook). Accordingly, we expect to see further increases in house-sharing and the increased uptake in studio/one bedroom apartments in our local area among younger tenants because of the demand-supply imbalance in this sector.
Indeed, we have seen smaller properties continue to perform the most strongly with a smaller pool of potential tenants for larger properties. On the supply side, this is likely to be offset by a rise in accidental landlords and opportunistic overseas investors seeking to make a currency gain by investing in the array of new developments such as West Hampstead Square, Queens Park Place, Argo House and Canterbury Lofts.
Therefore we expect the local rental market to remain price sensitive but to remain popular with both families and young professionals alike. Landlords will need to remain competitive in asking rents and being flexible on terms as well as ensuring the property is presented in good condition to ensure they attract both mainstream and prime tenants in the long term.
Here at Paramount, we continue to buck the trend in this regard by exponentially increasing our client base whilst offering our clients regular property inspections and real-time reporting.