Today we are concerning ourselves with the current trends in the South West London rental property market, the law of supply and demand and what that means for renters, prospective buyers and current landlords.
Firstly, let’s arm ourselves with some information to make sense of the current market conditions.
Rental stock is very low. Rental supply has consistently been falling as new taxes and regulations introduced to the lettings sector have led to landlords selling out of the buy-to-let business. In April 2017, the U.K. instituted what in effect is a tax increase on landlords by phasing out a mortgage interest relief on buy-to-let properties. The relief has been reducing by 25% annually and will be removed entirely next year.
The rise came on the heels of a 3% increase to the stamp duty tax for additional and buy-to-let home purchases introduced in 2016 in addition to the loss of the annual 10% wear and tear allowance. These combined reforms have led to a property sell-off by buy-to-let landlords. Among the purchasers of this sell-off stock are an increasing number of first-time buyers. First-time buyers now account for 44% of all residential property purchases in London on average. In Wandsworth they make up 49% in other boroughs the percentage is in the 50s.
Now, what does this all mean in terms of Supply and Demand?
1: It means there is a shortage of properties for those wishing to rent.
2: This means rental prices increase and therefore rental investment yields are increasing.
3: We are seeing renewed investment from savvy property investors who are again looking to the capital for rental property investments.
This lack of supply and the increasing rental yields point towards a wave of investment and a subsequent surge in property prices.
All in all, it looks very much like we have reached a market bottom and now is the time to buy.