Stagnant sales see property lets jump 128%
The number of properties being put up for rent in London has increased 128% in the past year, as the stagnant property market sees increasing numbers of owners resorting to letting out their homes.
Despite recent figures suggesting that interest from buyers continues to grow, the continuing lack of mortgage credit means viewings simply aren’t converting into sales. Homeowners unable to sell are instead putting up their homes for rent instead, hoping to earn an income while they wait for the housing market to fully recover.
The glut of homes available to let has forced landlords to lower their rents by more than 18%, according to new figures from Primelocation.com. The estate agency portal reports that since February alone rents have reduced by 2.12% with landlords forced to compete on price in order to entice prospective tenants.
All the regions within London have been hit by the crunch of rents, with landlords in the north west, Islington and Docklands particiarly suffering. This is the 12th successive month that Primelocation.com has reported a fall in weekly rents.
Andrew Smith, head of research at Primelocation.com, says renters should make the most of the market to negotiate on price: “In some cases, falling prices present tenants with an opportunity to secure prime properties that were previously out of reach. Until stock volumes begin to decrease we expect that prices with continue to be under pressure.”
Ed Stansfield, property economist at Capital Economics, says that despite evidence that activity levels have turned a corner, sales are still far below the levels seen at the height of the market in 2007.
“There is little to suggest that activity levels will normalise any time soon,” he adds. “Nor does the survey suggest that any recovery in sales will be enough to stabilise house prices in the near future, let alone begin to push them higher.”
Increasing unemployment levels and restricted mortgage credit remain key to the problem, with buyers either reluctant to purchase property – or unable to because they can’t get a mortgage,
However, other sources of data suggest the green shoots of recovery could be in sight. Nationwide's house price index recently indicated a spring bounce in March - despite values being down 16.5% on an annual basis, prices increased by 0.9% during March and house purchase activity reached its highest level since May 2008.
Elsewhere, both the Council of Mortgage Lenders and the British Bankers’ Association have seen a rise in the number of house purchase loans approved in February. And the Royal Institution of Chartered Surveyors says that buyer interest continued to grow in March, with the number of sales versus the amount of property on the market also increasing for the third consecutive month.
HSBC has also prompted confidence in the mortgage market, after it launched a new range of mortgages priced at under 5% available up to 90% of a property’s value.
Andrew Montlake, director at independent mortgage broker Coreco, says: "Sentiment is returning, buyer numbers are slowly increasing, enquiries are up and there are signs that lenders are starting to relax their criteria. Although the recovery process is likely to be painfully slow given the general state of the economy, things are starting to improve."
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