More property owners in London should consider listing their Right to manage London property for rent as rental yields on London property now appear to be improving due to the ever increasing number of people looking to rent property in the capital. There has been a dramatic shift in the supply and demand for rental property in recent months, with the availability of quality rental properties in London falling.

Emerging cosmopolitan city

A thriving cosmopolitan city, London has long been a popular place to rent property. However, finding a suitable rental property in London has become more difficult as the supply of rental properties has dwindled, largely due to a wave of “reluctant tenants”, according to the Association of Residential Letting Agents (ARLA).

Foxtons , a company with a high renewal rate, are seeing more tenants negotiating renewals of their current leases due to a relative lack of alternative rental properties.

Provision of rental properties

ARLA research, conducted among UK landlords and landlords, found that the supply of rental property has fallen while rental demand has increased, partly because fewer people are currently buying property. Ian Potter, Operations Manager at ARLA said: “Many people who are now able to buy are having difficulty finding the right property due to a lack of both property for sale and realistic mortgages.”

Quarter of last year

In the last quarter of last year, an average of 41% of ARLA members surveyed said there were more tenants than rental properties.

Peter Rollings , managing director of a leading London letting agent, commented: “Inventory seems to be an issue in the rental market. It really confuses me where all this real estate has gone!

Fence at the moment

“In fact, more people are sitting on the fence right now and choosing not to rent their property while waiting to see what happens in the for-sale market.”

The rise in tenant demand also comes at a time when the supply of new-build residential properties entering the rental market is declining. The National Housing Federation reports that the number of new homes being built in England and Wales this year is expected to fall to its lowest level since 1923.

Real estate developer

Developers are expected to build fewer than 123,000 homes between April 2009 and March 2010, down 18,000 from last fiscal year, as most builders scaled back construction in the face of the recession. This year saw the lowest level of new construction since 1923/24, when just 86,000 dwellings were built, excluding the war years.

“As demand exceeds supply, we face a new challenge – how do we offer enough quality rental properties to meet that demand,” added Potter.

Real estate market in London

The decline in London’s property rental market Right to manage London coupled with rising demand for rental property is in turn leading to a reduction in rent defaults and a rise in rental prices and yields across much of London – an attractive proposition for rental property investors.

Foxtons, for example, has had 20% more applicants for rentals since January than this time last year. This demand leads to rent increases and an increase in renewals.

Rollings concluded: The buy-to-let market is likely to rebound this year, as more people are likely to want to take their money out of the banks, where they can get negligible interest, and invest it in something real and tangible.

Current yield of up to 7 percent

“[London’s property rental market] will not only give people a current yield of up to 7 percent, but will also give them capital appreciation over the medium term.” A view echoed by other London estate agents such as Savills, who forecast house price growth to far outpace inflation over the next decade.

Lucian Cook, Director of Savills Research, said: “A regionalised recovery in the property market is now inevitable, with a ripple effect emanating from the main markets of London and the South East.

1. Does the company have a dedicated management arm?

They want to know whether the property management offers a full service or whether it is just a sideline of a real estate agency. Who and how is your property managed? How many employees are in the office? Who takes care of you and your tenants when employees are absent or sick?

2. Does the company owner/managing director participate in the business?

Most real estate management companies are twofold – selling real estate and managing real estate. Usually the managing director of the company deals with the sales side, as this is the most profitable area of the company, and a property manager takes care of the lettings. If the company director is involved in the real estate management part of the company, you may find that he takes it more seriously than others.

3. How well do you know the rental business?

Ask the property manager how long he has been personally involved in property management. Just because you are dealing with a well-known real estate company does not mean that their employees have a lot of experience. It also doesn’t mean that they offer top-notch customer service.