The London lettings market will remain fragile in 2009 and it is inevitable that more tenants will default.
This is the view of Judienne Wood, lettings director at Kinleigh Folkard & Hayward, who on the plus side also believes that London investments are likely to perform better.
She said: “In the first six months of the year we recorded rental rises of just two per cent in our branches across London. Due to the current economic climate, we have seen a shift in supply and demand, with the supply of properties to let starting to outweigh demand from tenants.
In 2009 we will continue to see a fall in tenants registering as most will not move unless they really need to. Our stock levels are likely to rise as more would-be sellers rent out their home and canny investors will buy investment properties cheaply to rent out.
“As such, there will be a greater choice for tenants and the supply: demand ratio will increase.”
Wood warns that it is inevitable that more tenants will default on their monthly payments because of the economic climate and rising unemployment.
She added: “There is insurance to cover this eventuality and my advice to landlords is to make sure they are covered.
“On the bright side, there will always be demand for properties in London as the capital has Europe’s largest workforce, and so will weather an economic downturn better than regional areas.
“The student lettings market is recession-proof and so landlords considering investing should target university areas such as Peckham and New Cross for Goldsmiths College and areas with University hospitals such as Tooting.
“Overall, 2009 will not be an easy year for the lettings market. Landlords who have good, well presented properties close to transport links and who are prepared to be flexible and negotiate on the rental price are likely to find tenants quicker and avoid void periods more than landlords who hang on for top dollar rents.”
Elsewhere in the UK, Sheffield’s rental market is providing optimism for the city’s property sector, according to Knight Frank.
The UK city centre residential market is suffering from a lack of confidence but the effects have not been borne out in Sheffield’s rental market according to Tearle Phelan, head of residential development at Knight Frank Sheffield. He maintains letting prices are remaining constant and in many cases expected to increase in the coming months.
Phelan said: “Sheffield is at a massive advantage over other major northern cities, benefitting from its location, strength of the rental market and relative undersupply of city centre residential units.
“The strength of the rental market can also be attributed to the limited number of high quality centrally located schemes in Sheffield, especially when compared with other regional centres across the UK.
“Investors, property owners and potential buyers might not feel like it right now, but it is important to remain both realistic and optimistic in these difficult financial times.
“The mantra for Sheffield in this global economic situation should be to sit tight and remember that markets are cyclical.”
