If you ignore the irony and the glaring injustices the UK property market is a wonderful land of magic and dreams at the moment. The booming rental market is fueling a boom in the buy to let sector, and this, combined with foreign demand for the safe-haven of London property is putting a layer of happiness on top of several layers of misery.
The south-west and London have less misery than most, or at least, so you would think. Prices in London and the south west have been growing consistently since mid-2009, while most the rest of the country has endured stagnation in 2009, and fresh-falls for the last 18 months or so.
According to the main indices, the UK national average house price is what grew between Apr 2009 and mid-2010, but digging deeper we realise that this was driven by a strong performance caused by over-supply in London and the south, and only a marginally better performance in the rest of the country, i.e. stagnation instead of a continuous slide.
Looking at the reports of rental growth now, it would be easy to imagine that it would also be getting skewed by the south, but this isn’t the case. Sure, London and the south is seeing demand and rents grow at the UK’s fastest rate, but reports show demand and rents growing in most of the country. In fact, according to the latest buy to let index of LSL Property Services rents grew across the entire country in September. The LSL index, which is based on a representative sample of 18,000 properties across the UK, showed that the average rent in England and Wales grew 0.7% to £718pcm in September, beating the previous record of £713 set in August. Rents in London grew by 5.2%.
No one in the industry is falling off their perch in shock that the rental market would be experiencing such a boom; in fact it is the only logical outcome of the current set of circumstances.
For a start you had thousands of repossessions, pouring people (families) into the rental market (a repossessed borrower would stand no chance in a normal market). Then you have the fact that house prices never fell as far as expected. Then there is the mortgage market, in which, of the few first time buyers with credit immaculate enough to get a mortgage, most can’t raise the deposit they need to be able to afford a mortgage on a house in their area.
So, you have thousands of first time buyers becoming renters, joining the thousands of people who have been repossessed, and all on top of what would be the normal demand for rental property.
Landlords across the country have been reporting unbridled growth in demand for several months now, and the banks have been increasingly willing to lend to the buy to let sector, offering a range of new products to cater to their needs.
It is one of the aforementioned ironies that banks should now be falling over themselves to lend to a sector that took a lot of the blame for crashing it, and became a lending leper for the last 18 – 24 months because of that.
Most residential property investors in the UK with capital to invest are currently increasing the size of their portfolio. At the same time we have wealthy buyers from around the world buying up prime assets in London, because they are a safe asset against the world’s financial volatility and currency devaluation, and also because of the rental demand and subsequent investment potential. In short: the UK property market is alive.